merce, entered into the agreement referred to above, and it charged that the agreement was an unlawful one, and a combination and conspiracy, and that it was entered into in order to terminate all competition among the parties to it for freight and passenger traffic, and that the agreement unlawfully re¬ strained trade and commerce among the sev¬ eral states and territories of the United States, and unlawfully attempted to monopo¬ lize a part of such interstate trade and com¬ merce. The bill ended with the allegation that the companies were preparing to put into full operation all the provisions of the agreement, and the relief sought was a judg¬ ment declaring the agreement void and en¬ joining the parties from operating their roads under the same. The defendant, the Joint Traffic Association, filed an answer (the other defendants substantially adopting it), which admitted the making of the con¬ tract, but denied its invalidity or that it is or was intended to be an unlawful contract, combination, or conspiracy to restrain trade or commerce, or that it was an attempt to monopolize the same, or that it was intended to restrain or prevent legitimate competi¬ tion among the railroads which were parties to the agreement. The answer, in brief, denied all allegations of unlawful acts or of an un¬ lawful intent, unless the making of the agree¬ ment itself was an unlawful act. The an¬ swer then set forth in quite lengthy terms a general history of the condition of the rail¬ road traffic among the various railroads which were parties to the agreement at the time it was entered into, and alleged the ne¬ cessity of some such agreement in order to the harmonious operation of the different roads, and that it was necessary as well to the public as to the railroads themselves.
The case came on for hearing on bill and answer, and the circuit court, after a hear¬ ing, dismissed the bill, and upon appeal its decree was affirmed by the circuit court of ap¬ peals for the second circuit, and the govern¬ ment has appealed here.
Mr. Jolin K. Richards, Solicitor Gener¬ al, for the appellant, the United States:
The agreement violates the anti-trust law because it creates an association of compet¬ ing trunk-line systems, to which is given ju¬ risdiction over competitive interstate traf¬ fic, with power, through a central authority, aided by a skilful scheme of restrictions, reg¬ ulations, and penalties, to establish and maintain rates and fares on such traffic and prevent competition, thus constituting a con¬ tract in restraint of trade or commerce among the several states, as defined by this court in United, States v. TranS-Missouri Freight Asso. 166 U. S. 290, 41 L. ed. 1007.
In the Trans-Missouri case this court held (1) that the anti-trust law applies to com¬ mon carriers by railroad; (2) that it prohib¬ its and renders illegal all agreements in re¬ straint of interstate trade and commerce, whether the restraint be reasonable or un¬ reasonable.
The question, then, i3 whether the agree-
261
Supreme Court of the United States.
ment under consideration operates as a re¬ straint upon interstate trade and commerce. The prohibition of the Anti-Trust Act, as construed by this court, applies to all con¬ tracts in restraint of trade or commerce, and is not confined to those in unreasonable re¬ straint.
But as a contract in restraint of com¬ merce, the Trans-Missouri agreement is crude and ineffective when compared1 with the Joint Traffic agreement. The Trans- Missouri provides a penalty for competition. The Joint Traffic goes further, and contains provisions designed to deprive companies of the means of competing, while removing the inducement to compete. Control of the solic¬ iting and contracting freight and passenger agencies is placed in the managers, who are authorized to organize joint agencies. This done, the supervision of the sources of secur¬ ing business being thereby given to the man¬ agers, they are charged with the duty of ap¬ portioning the competitive traffic equitably among the members of the association.
Of course the purpose is to remove the in¬ ducement to compete. An agreement to ap¬ portion traffic operates the same as one to divide earnings. Railroads which pool their earnings have no inducement to compete. All the individual company earns goes into the pool, and it only gets its share after all. So where the traffic business is pooled, if a company by competing gets more than its share, it must yield the excess by permitting a diversion of the traffic from its line to lines which are short. A strict account is kept of the traffic carried by each trunk line. If the traffic of a particular line exceeds its percentage, the line is deemed “over,” and must account for the excess to the lines which are “short.”
In prohibiting pooling. Congress did not make it a condition that the rates established and maintained under a pooling agreement should be unreasonable. It sufficed they would be arbitrary, uninfluenced by competi¬ tion. The public would be placed at the mercy of the traffic managers.
So, too, in the case of a contract in re¬ straint of trade prohibited by the anti-trust law; it is enough if the agreement interferes with those natural laws which ordinarily determine rates; it is enough if it restricts competition; it is enough if it puts it in the power of the combined railroads arbitrarily to fix rates. We do not have to inquire whether the rates fixed are reasonable or un¬ reasonable. It is the power through com¬ bination to fix rates arbitrarily, which is prohibited.
The Trans-Missouri ease was elaborately argued and carefully considered. A petition for a rehearing was presented and denied. The decision has been accepted and acted up¬ on, by the departments of the government, and by the courts, both state and Federal, as definitively settling the meaning and scope of the Anti-Trust Act when applied to traffic associations among competing interstate railway systems. The decision was not only a just, but an eminently salutary one. I shall not concede that the principles it laid down remain Questionable. I shall not 262
Oct. Term,
admit that it is necessary for me by argu¬ ment to fortify the positions taken by this court in that case. The anti-trust law as there construed is the law of the land.
The wisdom of Congress in prohibiting all agreements in restraint .of trade among in¬ terstate railway systems is even more mani¬ fest now than when the Trans-Missouri case was decided. At the time of the argument cf the Trans-Missouri case it was still to some extent a mooted question whether the Interstate Commerce Commission was em¬ powered to determine what are fair and rea¬ sonable rates, and to enforce such rates. This question is no longer open.
Interstate Commerce Com mission v. Cin¬ cinnati, N. 0. & T. P. R. Co. 107 U. S. 479, 42 L. ed. 243; Interstate Commerce Commis¬ sion v. Alabama Midland R. Co. 168 U. S. 144, 42 L. ed. 414.
It will probably be urged that any illegal¬ ity in the agreement is cured by § 3 of arti¬ cle 7, which reads ;
“Sec. 3. The powers conferred upon the managers shall be so construed and exercised as not to permit violation of the Interstate Commerce Act, or any other law applicable to the premises, or any provision of the charters or the laws applicable to any of the companies parties hereto; and the managers shall co-operate with the Interstate Com¬ merce Commission to secure stability and uniformity in the rates, fares, charges, and the rules established hereunder.”
An injunction to construe and exercise powers conferred so as to permit no violation of law is an admission that the powers may be so construed and exercised as to violate law. If the anti-trust law prohibited only those contracts in unreasonable restraint of trade or commerce there might be saving force in this section. But the anti-trust law prohib¬ its all contracts in restraint of trade or com¬ merce. Whether the rates be reasonable or unreasonable, an agreement providing for their establishment and maintenance by an association of interstate railways is prohib¬ ited. The managers can exercise none of the essential powers conferred by the agreement without violating the law. In the matter of the essential powers it is not a question of method or degree; the powers cannot be exercised because they are in themselves il¬ legal.. The association is itself illegal. It is formed for the purpose of controlling certain competitive traffic. The central au¬ thority, the managers, is given the power to establish and maintain rates on that traffic. Take away from the association the power to establish and maintain rates, and it immedi¬ ately falls to pieces. It ceases to have a raison d’etre.
It will be observed that the managers are not instructed to co-operate in securing rea¬ sonable. rates. The latter part of this sec¬ tion is inserted to support, not the real, but ostensible purpose of the association, name¬ ly of aiding the Interstate Commerce Com¬ mission to enforce the law. Assuming the Commission powerless to enforce the law, the railroads ignored both the Commission and the law, and proceeded to form an associa¬ tion outside of the law and in violation of
171 U. S.
1898.
United States v. Joint-Traffic Association.
the law, to aid in enforcing the law. The railroads shatter the iaw, and then combine to support the fragments.
It was contended below that the bill was multifarious. There is but one cause of ac¬ tion in the bill, — namely, the agreement. Upon that the bill is based. It seeks to en¬ join the execution of an illegal contract. The averments of intent in the bill are unneces¬ sary and immaterial. At the most they are conclusions of law. The court will examine the agreement and determine the question of law with respect to its meaning and effect; will determine whether the agreement re¬ strains trade or commerce in any way so as to violate the law. If the agreement is pro¬ hibited by the anti-trust law the court will •enjoin its execution; and the court will do this irrespective of whether the agreement -does or does not also violate the Interstate Commerce Act, or those general principles ■of law which prevent any interference with interstate commerce.
It is not necessary for the government to insist that the agreement violates more than one law. It is clearly illegal as a contract in restraint of trade or commerce under the anti-trust law. The fact that it also violates some other law, if it does, assuredly will not cure its illegality under this law, or prevent the court from enjoining its execution. A thing which is doubly bad does not, there¬ fore, become good. The rule of double nega¬ tives does not apply. Nor is the government deprived of the power to restrain the execu¬ tion of a contract in restraint of trade or commerce under the anti-trust law because the contract contains a provision under which individuals have committed, or may commit, offenses punishable under the Inter¬ state Commerce Act. If a man threatens my life I am not to be deprived of the right to put him under bond to keep the peace be¬ cause he has also stolen my property.
The authority of the government to main¬ tain this suit is sustained in United States v. Trans-Missouri Freight Asso. 166 U. S.
290. 343, 41 L. ed. 1007, 1028; citing Re
Dels, 15S U. S. 564. 39 L. ed. 1092; Cincin¬ nati, A7. 0. & T. P. R. Co. v. Interstate Com¬ merce Commission, 162 U. S. 184, 40 L. ed. 935, 5 Inters. Com. Rep. 391; Texas & P. R. Co. v. Interstate Commerce Commission, 162 U. S. 197, 40 L. ed. 940, 5 Inters. Com. Rep.
405.
Messrs. James C. Carter and Lewis Cass Ledi/ard, for the Joint Traffic Association, appellee :
The object of the bill is to procure an ad¬ judication that a certain agreement entered into between a large number of railroad com¬ panies forming most, but not all, of the lines or systems engaged in the business of rail¬ road transportation between Chicago and the Atlantic coast, for the purpose of forming an association for the better regulation of a certain part of the traffic of those lines and systems, is illegal and void, and enjoining its execution.
Congress in 1887 enacted the Interstate Commerce Law, the main design of which was to abolish discrimination in rates and secure a greater degree of uniformity, and to
171 U. S.
j that end it required all railroads engaged in interstate transportation to file with the Commission and publish schedules of their respective rates, and forbade the carriage of goods for any greater or less compensation than that specified in the published rates.
Even before the passage of the law the ri¬ val lines engaged in an effort to agree upon the Schedules which each should file, and had reached such agreement in time to file and publish them in compliance with the provi¬ sions of the law.
The agreement in question was believed to promise great benefits and to make it in the interest of all to comply with the Interstate Commerce Act, and to detect, expose, and punish any who, from a mistaken view of interest, should violate it.
It made no effort to prevent competition : but sought to devise a scheme which would compel any competition to be fair, lawful, and open, and enable any rival to meet it without violating any law.
Unfortunately, large corporations are viewed ivith a jealousy which does not con¬ fine itself at all times within the bounds of reason, and this sentiment creates hostilities to which it is but natural, at least, that public officials should yield. Transactions which, in the absence of political prejudice and passion, would pass unnoticed by those not immediately affected by them, are sub¬ ject to hostile scrutiny; and it was not un¬ natural that such an agreement should raise a clamor that it was designed to raise rates. There never was a pretense, however, that under the agreement there was the slightest exaction of unreasonable charges. On the contrary the schedules of rates agreed upon and filed with the Interstate Commerce Com¬ mission had never been objected to by that body, and were notoriously lower than those imposed for similar services in any other part of the world.
The answer denies every allegation of un¬ lawful act or of unlawful intent, unless the making of the agreement itself was an un¬ lawful act.
It may seem at first that we are aiming to persuade the court to reconsider its reason¬ ing and determinations in the recent case of United States v. Trans-Missouri Freight As¬ sociation.
It may be that one of the questions now sought to be presented might have been made in that case and a decision of it obtained; but it is quite certain that the question was not raised.
The precise question which was considered and determined in the case above referred to was this : Assuming that the agreement was one in restraint of trade, would the circum¬ stance that the restraint actually imposed by it was reasonable relieve it from the con¬ demnation of the statute? Or, in other words, does the statute by a true construc¬ tion condemn all agreements in restraint of interstate trade and commerce, or such only as were at common law unlawful?
Prior to, and at the time of, the passage of this law there were, as there still are, cer¬ tain tendencies in the industrial world which drew widespread attention and excited in
263
Supreme Court op the United State.*-.
Oct Term,
some minds much alarm. Many industries were seen or supposed to be under the con¬ trol of great aggregations of capital, either in the hands of individuals united under some form of agreement, partnership or other, or contributed as the capital of cor¬ porate bodies. Some of the most conspicu¬ ous were called by the vague name of “trusts,” and this term came to be employed in a general way to designate all of them. For obvious reasons, and quite aside from the question whether their objects and effects are mischievous ot beneficial, such combina¬ tions of capital are not popular, and the designation “trust” came to be rather a re¬ proachful one.
Undoubtedly it may be possible for a large aggregated capital to wield greater power in many ways than would be possible for the same amount distributed among many sepa¬ rate owners or managers, and the suspicion was entertained that such power was em¬ ployed in controlling markets, and perhaps in controlling legislation, and it was also thought to be an instrumentality by which the unequal distribution of wealth was fos¬ tered and increased. The disfavor thus ex¬ cited was, as was natural, turned to politi¬ cal account. Those opposed to a protective tariff charged upon its advocates that they were favoring and stimulating trusts, and the latter felt the need of repelling the charge by doing something to show that they were the declared enemies of trusts.
Under such circumstances it was quite natural that schemes of legislation aimed against these supposed public enemies should be started, and any opposition to them would naturally draw upon tire authors of it the re¬ proach that they were the friends, and per¬ haps the paid defenders, of these powerful interests.
While, therefore, all, or nearly all, pro¬ fessed themselves in favor of repressive leg¬ islation, the question what legislation could be contrived was a difficult one and suggested some difficult questions. How was a trust to be legally defined so that a prohibition of it should not include a prohibition of the ex¬ ercise of the clearest constitutional rights? Congress surely could not prevent the crea¬ tion of corporations under state laws, or limit the capacity of forming partnerships, or m any manner interfere with the internal business of states. And was it certain that these so-called trusts were in every instance necessarily mischievous? Indeed, sensible legislators for the most part understood very clearly that the things complained of were but the necessary incidents and consequences of the progress of industry and civilization, and could not be arrested without checking the advance of the nation and crippling it in the fierce competitions with other nations, and that any useful effort to remedy the sup¬ posed evils must be directed against the abuses of the power of aggregated capital, and not at the aggregations themselves. Under these circumstances Congress proceeded very cautiously, and enacted the only measure which seemed possible without passing the plainest constitutional limits. It did not attempt to define “trusts” or limit aggrega- 264
tions of capital in any form. The general charge was that these combinations were in some form monopolies and in restraint of trade ; but Congress did not in the remotest degree attempt to define what a monopoly or restraint of trade was. It was, however, perfectly safe to declare that if these' com¬ binations did in any case create monopolies or restraints upon trade, they should be pro¬ hibited from doing so in the future; and this is what Congress did, and all it did, by passing the act in question. It prohibited contracts and combinations to create monop¬ olies or restrain trade, and left it to the courts, without a word of direction or in¬ struction, to determine what contracts did create monopolies or restrain trade, and what did not.
It cannot be said that Congress has done an unwise or imprudent thing, and that if calamity occurs the fault lies at its door. It has prohibited nothing but contracts and combinations to create restraints of trade and monopolies. These, when properlv de¬ fined are, beyond question, public mischiefs and ought to be prohibited. If any useful thing becomes stricken down by the law, it must be the result of some erroneous inter¬ pretation.
The first question we design to consider is whether the agreement violates any of the provisions of the act referred to. To this end it is of much importance to have in mind the particular nature of the subject with which this act deals, and how that subject has been heretofore treated in law and legislation. It is obvious that Congress conceived itself to be dealing with acts supposed to be pro¬ ductive of injury to the public, and of injury to such an extent as to justify repressive leg¬ islation.
It is not contracts only of a certain char¬ acter which are condemned, but they are coupled together with certain other acts, pre¬ sumably of a similar nature or tendency, — namely, combinations or conspiracies in* re¬ straint of trade, and monopolies, or combin¬ ations or conspiracies to monopolize. Con¬ tracts therefore are dealt with, not so much as contracts, but as one form of acts relat¬ ing to trade and commerce, assumed to be injurious in their tendency and effect.
That contracts of a certain class may be opposed to sound public policy has been rec¬ ognized in the law from a very early period. The grounds or reasons of policy on which they are held void or illegal are very nu¬ merous and varied, but a class embracing nu¬ merous instances is formed of such as are sup¬ posed to have an injurious effect upon trade or commerce ; between these, however, there is quite a marked distinction observable in the way they are treated in the law. One description embraces simply ordinary busi¬ ness transactions, where the parties make agreements with each other for supposed mu¬ tual profit and advantage, a breach of which would result in pecuniary loss or damage to the one or the other, and a demand for re¬ dress. In such cases the parties expect and intend to enforce the contract, and look to the ordinary legal remedies as the means of enforcing it. Contracts whereby a business
171 TJ. S.
1898.
United States y. Joint-Traffic Association.
is sold and the seller covenants that he will not thereafter carry it cn, or where a man takes an apprentice with an agreement that he will not set himself up in opposition to his master in trade, supply familiar examples of this character.
Inasmuch as such contracts would not be entered into unless it was believed that the law would afford redress in case of a breach of them, the repressive purposes of the law, where they are supposed to be opposed to public policy, are, in general, fully satisfied by declaring them void and denying redress, and this is usually the extent of the notice which the law takes of them. There is no occasion for criminal legislation, both for the reason that there is not present, ordinar¬ ily, any criminal purpose, and, if there were, repression is sufficiently accomplished with¬ out a resort to it. The doctrine respecting contracts of this character belongs, there¬ fore, to the law of contracts.
But there is another and much smaller de¬ scription of contracts supposed to be injuri¬ ous to trade, of quite a different character. They are not, properly speaking, business transactions. They do not involve the sale, leasing, or exchange of property, or the hire of services ; nor does a breach of them usual¬ ly result in distinct and ascertainable pe¬ cuniary loss. They are not, indeed, entered into by parties in different interests, as in the case of buyer and seller, one of which ex¬ pects to gain something from the other, but by parties in the same interest having in view an object for the common good of all; nor do the parties to them generally look to, or rely upon, any legal remedies to secure obedience to them. They spring out of cir¬ cumstances which impress the parties to them with the belief that they have a com¬ mon interest, or that it is expedient to cre¬ ate a common interest among them, and seek to control or regulate the conduct of each other in relation to business. Instances of this description of agreement are found where laborers or employers unite, in the form of agreement, to regulate hours of labor or prices, or where merchants or tradesmen combine to transact their business in certain prescribed ways, or to establish uniform prices for their goods, or to suppress or reg¬ ulate competition among themselves; or where a class of producers or dealers combine together to control a product or a business, with a view of imposing upon others their own terms as to prices, or other incidents of the business.
The marked distinction between these cases and the ordinary business transactions first spoken of is that in the latter there is a difference of interest, sometimes regarded as a hostility of interest, between the parties, each seeking to gain the utmost from the other; whereas in the former the parties are in the same interest, each seeking the same end. The term “contract” does not well ex¬ press this sort of agreement. It is a uniting together for a common purpose, — a combina¬ tion, — or, when thought to be of an objec¬ tionable character, a conspiracy. Such un¬ ions always suppose agreement, but it need not be in writing; where it is in writing it is 171 U. S.
often called an agreement, or contract; but in giving it this name we should not lose sight of its real character. In reality it is simply an act, and innocent or guilty accord¬ ing as the law may be inclined to regard it.
It is manifest that where the law does re¬ gard it as mischievous, and to such a degree as to call for repression, it is not enough to simply declare it illegal. The practice may nevertheless be persisted in, and as it does not rely for its efficacy upon legal remedies, the mere withholding of such remedies may be ineffectual. The action, therefore, which the law usually takes in respect to such so- called contracts, is in the form of prohibi¬ tion and penalty; and the subject belongs, not to the law of contracts, but to the crim¬ inal law, where it is usually dealt with under the head of conspiracy.
We do not mean by the above observations that there may not be instances which par¬ take to a greater or less degree of the quali¬ ties of both the classes above mentioned; but the distinction between them is so con¬ stant and pervading that it will be at once recognized.
As a conclusion to what is said we desire to point out that the legal doctrine and policy to which this Anti-Trust Act belongs is manifestly the one last described. The cir¬ cumstance that contracts are grouped to¬ gether with combinations and conspiracies, and made the subject of criminal treatment, shows this very plainly.
The inaptitude of some of the language of this legislation is quite apparent. Undoubt¬ edly the object of Congress was to reach that class of supposed mischiefs which flow from combinations. But the great bulk of the eases in which the courts have felt called up¬ on to say anything about contracts in re¬ straint of trade has been the business trans¬ actions first alluded to, in which an agree¬ ment has been entered into not to exercise a particular calling, — as, where the keeper of a well-patronized tavern sells out his estab¬ lishment and goodwill, and covenants not to further carry on the business. Such agree¬ ments at the common law have been held valid or void according to the supposed rea¬ sonableness of the covenant; but surely even when void, there was nothing about them calling for the intervention of the criminal law. And yet this statute bunches the valid and void all together, and makes them all criminal, when probably there was not the remotest intention to make any of them criminal.
These observations, of course, fully admit that the particular agreement or combina¬ tion against which this action is aimed would be, assuming that the act covers the con¬ tracts between railroad companies, obnoxi¬ ous to the penalty imposed by the act, pro¬ vided it were in fact in restraint of trade or commerce between the states. That it is in fact in restraint of trade or commerce must be shown before this action can be main¬ tained, and this is the proper subject for dis¬ cussion in this action. This question . is broadly open and unaffected by any decision of this court, and we expect to show that the- agreement is, not only not in restraint of
Supreme Court of the United States.
Oct. Term,
trade and commerce, but highly beneficial to was not intended. Expressio unius est ex- both; that Congress has never declared or clusio alterius.
intended to declare it criminal, and that it A clear understanding should be had at
is deserving, not of judicial condemnation, but of judicial encouragement and approval.
Unless the act is subject to the interpre¬ tation hereinafter maintained, it is open to grave objections on constitutional grounds, which will be dealt with by other counsel.
The court has no jurisdiction to entertain this suit unless it can be found in the provi¬ sion of some statute.
The bill sets forth simply the commission of a misdemeanor, and an intention on the part of the defendants to repeat the offense. No principle of the public remedial law of America or England is more fundamental than that the ordinary administration of criminal justice by the ordinary courts of common law, is sufficient for the repression of crime, and exclusive adhesion to it neces¬ sary for the protection of the citizen.
Courts of equity have no jurisdiction to restrain the commission of crime, or to en¬ force moral obligations and the performance of moral duties; nor will they interfere for the prevention of an illegal act merely be¬ cause it is illegal.
High, Tnjunc. § 20; Atty. Gen. v. TJtica Ins. Co. 2 Johns. Ch. 371 ; Re Debs, 158 U. S. 564, 593, 39 L. ed. 1092, 1106.
In the case at bar nothing whatever is al¬ leged except the mere violation of the law and the intent to continue it. It is not alleged that such violation does, or will in fact, lead to the imposition of any unjust or unreason¬ able charge for the carriage of merchandise, or any unjust discrimination, or in any way diminish or impair any facilities for carry¬ ing on interstate commerce. Indeed, the avowed and apparent purpose of the agree¬ ment is to secure justice, equality, and im¬ provement in interstate transportation; and this purpose stands admitted. All that is averred in the bill is that the method chos¬ en to accomplish the purpose is prohibited by penal law.
The Anti-Trust Act contained provisions purporting to create a jurisdiction in equity to give relief by way of injunction; and perhaps the decision made by this court in the suit of United, States v. Trans-Missouri Freight Asso. should be regarded as a de¬ termination that the Attorney General was at liberty, in case of any violation of the pro¬ visions of the act, to file a bill for an injunc¬ tion, although it would seem necessary, upon familiar principles, to make out a case for equitable interposition in order to justify an appeal to the equitable jurisdiction thus cre¬ ated. But so far as it is sought to maintain the present action on the basis of an alleged violation of the provisions of the Interstate Commerce Act, no support can be derived I from the decision above referred to. No such jurisdiction in equity is given by that act. And by implication at least it is” with¬ held; for in certain cases specially men-' tioned in §§ 6 and 13 jurisdiction is express¬ ly given to courts of equity to grant injunc¬ tions. If it is not given in other cases it must be taken to be for the reason that it ■266
the outset with the meaning of the terms ! with which we are dealing. The contracts ! condemned by the Antj-Trust Act are such, and such only, as have the effect of restrain¬ ing trade or commerce. The actual effect ; which the contracts have upon trade or com¬ merce is the material consideration which determines whether or not they are included within the class.
This is self-evident. But the possible sug¬ gestion may be made that there is a class of contracts called or named “contracts in restraint of trade,” and that the statute re¬ lates to these irrespective of their real and true effect.
There is no foundation for such a sugges¬ tion. There is no class of contracts known to the law by the name of contracts in re¬ straint of trade irrespective of their actual effect upon trade. Whenever heretofore the point has been made in the case of a particu¬ lar contract whether it was in restraint of trade, it has been determined by an inquiry into its actual effect upon trade. No sug¬ gestion would have been indulged that it was valid or void according as it might or might not be called a contract in restraint of trade.
Moreover, we are dealing with the crimi¬ nal law, which never classes acts and makes them punishable under arbitrary names without regard to their supposed effects, as being actually mischievous or otherwise. This would be putting innocence on a par with guilt.
Doubtless there are certain contracts which readily come to mind where contracts in restraint of trade are spoken of. and which -may therefore be taken as good exam¬ ples of the class. They are such as directly purport and assume to restrain trade, and which consequently do. in some sense and de¬ gree at least, neeessarily_restrain it.
Mitchel v. Reynolds,' 1 P. Wms. 181; Da¬ vis v. J/flson, 5 T. R. 118.
Agreements for combinations among per¬ sons engaged in the same employment, to promote their supposed interests, — as. of la¬ borers and employers, or merchants, or tradespeople, have rarely, if ever, been styled agreements in restraint of trade.
There seems to be no room for doubt con¬ cerning the meaning of the term “in re¬ straint of trade or commerce.” To restrain is to hold back, to check, to prevent, and thus to diminish. It is the injury to trade or commerce which the act is aimed to pre¬ vent. Unless, therefore, a contract injures and thus diminishes, or tends to diminish, trade or commerce, it cannot be deemed as in restraint of trade or commerce.
The agreement under which the Joint Traffic Association was formed, and the carrying out of which is sought to be en¬ joined, is not a contract in restraint of trade or commerce within the meaning of the act of July 2. 1890.
It does not in terms purport or assume to restrain or limit trade or commerce. No one of the parties to it undertakes in any
171 U. S.
1898.
United States v. Joint-Traffic Association.
manner to refrain from doing business. In¬ deed, it evidently assumes that all the par¬ ties to it are to continue to do all the busi¬ ness which their facilities enable them to do, and to strive against each other for a larger share of the business in every way except one.
It does, indeed, purport to restrain com¬ petition, although in a very slight degree and on a single point. That is one of its objects; and if competition and commerce were identical, bein^ but different names for the same thing, then indeed, in assuming to restrain competition even so far, it would be assuming in a corresponding degree to re¬ strain commerce; but surely no such iden¬ tity will be pretended. Commerce is the in¬ terchange of commodities. Competition is one of its incidents only, and but an occa¬ sional incident. To identify a thing with one of its occasional incidents would be an error.
It is conceivable that a restraint upon competition, although competition is but an occasional incident of commerce must still necessarily restrain the latter; but, how¬ ever conceivable, it is by no means true. The contrary is often true; namely, that such restraint enlarges, increases, and benefits it.
Competition is, in general, a good thing; it is what is called “the life of trade;” and artificial efforts to repress it may have an injurious effect opposed to sound public policy; but to infer from this that it is so under all circumstances, or that it may not be productive of the most extensive mis¬ chief, is a conclusion of ignorance utterly re¬ futed by the teachings of experience, and long since discarded by all enlightened minds.
But it is worth while to employ a few words in pointing what the true and great benefit of competition is, and when it ceases to be beneficial and becomes the source of mischief.
There is a point beyond which competition may not only cease to be beneficial, but may become exceedingly injurious-, not only to private individuals, but to the public also.
When prices have reached the point which places the profits of a particular industry on a level with the average profits of indus¬ tries generally, the further prosecution of the struggle is likely to be injurious to the community, and the competition becomes de¬ structive and deadly, precisely in proportion to the difficulty of disengaging the capital employed.
A restraint upon competition does not of necessity restrain trade, but may even pro¬ mote trade.
If the restraint on competition effected by this agreement is necessarily in the eye of the law a bad thing in its effect upon trade, injuring and diminishing it, then, although trade is not in terms restrained by it, it is so in fact; and if, on the other hand, it is in the eye of the law beneficial to trade, or cannot be seen to be injurious (for the bur¬ den of proving its injurious tendency is upon the plaintiffs), it must be held to be unaf¬ fected by the statute.
The agreement in question, as a whole, 171 U. S.
and particularly so much of it as affects competition, is in the highest degree pro¬ motive of trade and commerce.
The charges of railroad transportation in the United States have been constantly diminishing, and they are now lower than in any country in the world; and it is probably true that the capital actually invested in railroads was at the time of the passage of the Anti-Trust Act receiving a smaller an¬ nual return than capital invested in any other business, notwithstanding the risk to capital invested in railroads is far greater than that which attends many other invest¬ ments.
The reason why railroads are greater suf¬ ferers than, other industries from the de¬ structive effects of free competition is that the latter have several defenses against it, while the former have but one.
The only resort open to railroads to save themselves from the effects of a ruinous com¬ petition is that of agreement among them¬ selves to check and control it.
The history of railroad transportation proves that whenever a railroad depends for its support upon traffic upon which another railroad is in like manner dependent, and the competition thus engendered has con¬ tinued for any considerable length of time, one competitor has either swallowed up the other, or, if both survive, it is under some modus vivendi established by agreement.
Suppose the case of several rival lines, all of them much-needed public facilities, and to support all of which there is a sufficient traf¬ fic at fair rates. The competition between them waxes fiercer and fiercer until the point is reached where there is no profit for the road possessing the least natural advantages. Can a word be said in defense of the propo¬ sition that public policy requires that this competition should proceed until it ends in the successive destruction of the weaker par¬ ties and the consequent loss of most useful public facilities?
From this we venture to draw the conclu¬ sion that competition is useful only where it is voluntary. Such a thing as competition made compulsory by law is utterly abhorrent to every principle of public policy.
Freedom of contract is, in general, the best public policy. Some will always be, found who will abuse freedom, and make contracts of a mischievous public tendency. These contracts should be declared illegal, and may justify penal enactments. The courts have a broad jurisdiction to inquire into and determine what contracts are and what are not in conflict with public policy.
The extinction of competition by agree¬ ment has always been going on in the indus¬ trial world, and to the principal ways in which it is done no sound lawyers or think¬ ers have ever suggested any objection.
An ideally perfect railroad service would be one in which a shipper was assured that he could deliver any amount, larae or small, of merchandise at any point in the country, at any time, destined for any other point, and have it delivered at its destination in safety and with despatch at a price known beforehand, which would fairly reward the
267
Supreme Court of the United States.
Oct. Term,
service and be no greater or less than that exacted from others in similar circumstances.
This would include the following requi¬ sites. (1) Uniformity in rates; (2) stabil¬ ity in rates; (3) equality in rates; (4) de¬ spatch and safety; (5) ease and convenience effected by classification and publicity; (6) reasonable rates.
It is an assured fact that whenever men are engaged in performing different parts of the same work they will co-operate in it; that is, they will agree with each other to the end that the work of each may be as little trou¬ blesome and as effective as possible. Self-in¬ terest and benevolence here concur with each other; and it may with equal confidence be said that men will under these circumstances always agree unless they are somehow pre¬ vented.
With the progress of railroad extension the need of stability, equality, and unifor¬ mity of rates became increasingly and at last overwhelmingly apparent, and the lack of them equally so. Under competitive condi¬ tions this was impossible except when brought about by agreement.
The present agreement was the effort of honorable men to enable themselves to car¬ ry on the most necessary of all businesses, without ruin to the property employed and without crime. The situation was unendur¬ able and demanded an earnest effort to dis¬ cover whether some agreement, other than pooling, could not be contrived which could be enforced and which would be effective. Whether the one actually devised will be effective if it is sustained cannot be absolute¬ ly affirmed. It has not yet been fully tried; but there is no objection to it of a legal na¬ ture, which upon any principle heretofore declared, can be sustained. Its object is not in any way to create a monopoly or raise rates; not, in any degree, to suppress or check competition other than secret and ille¬ gal competition. It punishes no conduct ex¬ cept criminal conduct. It seeks no other end than to maintain and enforce the observance of the Interstate Commerce Law, and to se¬ cure the stability, uniformity, and equality which are the chief objects of that law.
So far as respects all forms and modes of competition save one, the agreement saves and cherishes competition. The improve¬ ment of tracks and equipment, increase of facility, safety and despatch in the conduct of the service, are all encouraged. The more these qualities are exhibited by every line the larger traffic it gains, and all these in¬ creased rewards are its own. It is competi¬ tion in rates only which is aimed at; and this is not forbidden directly or indirectly. A temporary adherence to agreed rates for a period not exceeding thirty days is made ob¬ ligatory.
If further illustration were needed of the magnitude of the mischiefs brought about by unrestrained competition, of the impossibil¬ ity of checking or preventing them in any other way than by mutual understanding and agreement between the railway lines, of the efficacy of that method, and of the necessity for voluntary self-regulation through co-op¬ erative agreement and association, it will be 268
found in abundance in the often-repeated declarations of the Interstate Commerce Commission.
Boston Chamber of Commerce v. Lake Shore & M. S. R. Co. 1 Inters. Com. Rep. 763; Report of the Interstate Commerce Commission (1887) 1 Inters. Com. Rep. 653, 667-669, 671; Re Passenger Tariff & Rate Wars, 2 Inters. Com. Rep. 341.
When competition leads to the transporta¬ tion of property below the actual cost, fairly computed, it ceases to be legitimate. Fair and reasonable competition js a public bene¬ fit; excessive and unreasonable competition is a public injury. Competition is to bo regulated, not abolished.
Re Southern R. & S. S. Co. (1887) 1 In¬ ters. Com. Rep. 288.
It is inevitable that the probability that any prescribed rates will be accepted by the- public as just shall bo some extent be affect¬ ed by the fact that at some previous time they have been lower, perhaps considerably lower. K
Report of Interstate Commerce Commis¬ sion, 1 Inters. Com. Rep. 671, 672; Re Chi¬ cago, St. P. & K. C. R. Co. 2 Inters. Com. Rep. 148.
Every change in rates affects values; it disturbs trade and alters to some extent the value of contracts.
Re Chicago, St. P. & K. C. R. Co. 2 Inters. Com. Rep. 149.
Public good is best subserved when all the carriers which the needs of the country re¬ quire are suffered to do business at a reason¬ able compensation.
Second Annual Report of Interstate Com¬ merce Commission, 2 Inters. Com. Rep. 256.
If it is important to the public that a rail¬ road once constructed should be maintained, the ability to make charges that will render its maintenance possible is also of public im¬ portance.
Id. 258.
There is nothing in the existence of such arrangements which is at all inconsistent with earnest competition.
But in order to form them great mutual concessions are often indispensable, and such concessions are likely to be made when rela¬ tions are friendly, but not to be looked for when hostile relations have been inaugur¬ ated.
Id. 263, 264.
The practice of employing soliciting agents, and the somewhat kindred one of es¬ tablishing transportation lines. Red, White, Blue, etc., is in a large degree fruitful in violations of the law, dishonest artifices, and wasteful expenditure.
Re Underbillings, 1 Inters. Com. Rep. 817.
This agreement is likely to be very efficient in its operation, for (1) it takes away the temptation to violate the law; (2) it binds the parties not to violate it, and mulcts them in a severe penalty if they do violate it; and (3) it makes it to the interest of all except the guilty parties to detect and expose any violation, and thus bring it to punishment.
Fourth Annual Report of Interstate Com¬ merce Commission, 3 Inters. Com. Rep. 339,
340.
171 U. S.
1893.
United States v. Joint-Traffic Association.
The deliberate and solemn declarations of the body constituted by Congress itself to supervise the conditions of interstate com¬ merce and the actions of the various rail¬ road systems in respect thereto prove every material assertion made in this brief, of the unmeasured mischiefs of unfair competition in rates, and of the inability of repressing them in any other way than by the making and observance of such agreements.
Agreements in all fundamental respects similar to the one in question have been in force during the whole history of railroad competition, and in some instances going much further in doing away with competi¬ tion by actually pooling traffic or its re¬ ceipts; but will anyone say that commerce, the interchange of commodities, has been thereby restrained, that there has been less of buying and selling by reason of them ? Every¬ one must admit that trade and commerce have been prodigiously facilitated by them, and consequently increased.
The apprehensions of monopoly and op¬ pression with which we are dealing have no foundation in reason, or in experience.
The agreement which this action seeks to condemn is not, by reason of any restraint effected by it upon competition, or otherwise, a contract in restraint of trade or commerce, but is on the contrary, highly needful to, and promotive of, both.
The contract is necessary to the uniform¬ ity, the stability, the fairness, and the just¬ ness of rates; to the ease, safety, and con¬ venient despatch of the enormous transpor¬ tation of the country; is necessary as a sup¬ plementary aid to the Interstate Commerce Law; and necessary to the prevention of crime, concealment, and perjury, otherwise sure to be committed to a prodigious extent, and necessary to the preservation of great public facilities; and is not a contract, com¬ bination, or conspiracy in restraint of trade within the meaning of the act.
Tf the Anti-Trust Act is interpreted as for¬ bidding agreements such as the one under discussion, one of three alternatives must necessarily follow: (1) That all railroad
transportation will be abandoned ; or ( 2 ) the consolidation of all competing railroads un¬ der a single ownership, either governmental or private; or (3) that all competing rail¬ road business must be carried on in constant and daily violation of criminal law.
It is not possible for competing railroad transportation to be carried on permanently without uniformity in rates, fixed either by express or tacit agreement.
The multitudinous expressions of the In¬ terstate Commerce Commission all mean uni¬ formity of rates by agreement, either express or tacit.
Congress never intended in enacting the Anti-Trust Act, to condemn and make crimi¬ nal as restraints on trade those regulating contracts and arrangements respecting rail¬ road traffic which, in some form, are every¬ where adopted, and without which it is im¬ possible the business of railroads could be carried on in conformity with its own laws.
Church of the Jloly Trinity v. United States. 143 U. S. 457, 36 L. ed. 226.
171 U. S.
The positions taken in this brief are fully supported by the weight of authority.
Kellogg v. Larkin, 3 Pinnsv, 150, 56 Am. Dec. 164; Leslie v. Lorillard, 110 N. Y. 519, 1 L. R. A. 456; People v. North River Sugar Ref. Co. 121 N. Y. 582, 9 L. R. A. 33; Collins v. Locke, L. R. 4 App. Cas. 674; National Benefit Co. v. Union Hospital Co. 45 Minn. 275, 11 L. R. A. 437; Perkins v. Lyman, 9 Mass. 522; Manchester & L. R. Co. v. Con¬ cord R. Corp. 66 N. H. 100, 9 L. R. A. 689, 3 Inters. Com. Rep. 319; Judge Cooley’s ar¬ ticle in the Railway Review, April 26, 1884, on the subject of Traffic Pooling; Mitchel v. Reynolds, 1 Smith, Lead. Cas. pt. 2, p. 508; Perkins v. Lyman, 11 Mass. 76, 6 Am. Dec. 158; Pierce v. Fuller, 8 Mass. 223, 5 Am. Dec. 102;' Bowser v. Bliss, 7 Blatchf. 344, 43 Am. Dec. 93; Orundy v. Edwards, 7 J. J. Marsh. 368, 23 Am. Dec. 409; Morgan v. Perhamus, 36 Ohio St. 517, 38 Am. Rep. 607 ; Pike v. Thomas , 4 Bibb. 486, 7 Am. Dec. 741 ; Morse, Twist Drill & Mach. Co., v. Morse, 103 Mass. 73, 4 Am. Rep. 513; Hoyt v. Holla, 39 Conn. 326, 12 Am. Rep. 390; Hubbard v. Miller, 27 Mich. 15, 15 Am. Rep. 153; Cook v. Johnson, 47 Conn. 175, 36 Am. Rep. 64.
The opinion in the Trans-Missouri case suggested a distinction between agreement* restraining competition between persons or corporations engaged in business of a public nature, and those engaged in private busi¬ ness. To show this a passage is quoted from the case of Gibbs v. Consolidated Gas Co. 130 U. S. 396, 408, 32 L. ed. 979, 984, citing the following cases: New Orleans Gaslight Co. v. Louisiana Light & H. P. & Mfg. Co. 115 U. S. 650, 29 L. ed. 516; Louisville Gas Co. v. Citizens’ Gas Co. 115 U. S. 683, 29 L. ed. 510; Shepard v. Milwaukee Gaslight Co. 6 Wis. 539; Chicago Gaslight & Coke Co v. People’s Gaslight & Coke Co. 121 Ill. 530; St. Louis v. St. Louis Gaslight Co. 70 Mo. 69 ; Printing & N. Registering Co. v. Samp¬ son, L. R. 19 Eq. 462; West Virginia Transp Co. v. Ohio River Pipe Line Co. 22 W. Va. 600, 46 Am. Rep. 527 ; Western U. Teleg. Co. v. American U. Teleg. Go. 65 Ga. 160, 38 Am. Rep. 781.
The case of Gibbs v. Consolidated Gas Co. 130 Lh S. 396, 32 L. ed. 979, furnishes no color of support to the view that any dif¬ ferent rule is to be applied to the case of agreements between corporations engaged in business of a public nature from that which obtains in relation to agreements between in¬ dividuals engaged in the like business.
The suggested distinction between persons engaged in business of a public nature and those engaged in ordinary business, which forbids the former and permits the latter to enter into agreements which may restrain competition merely, has no support in the authorities referred to.
This question whether agreements between such persons are injurious to trade depends always upon the actual effect of such agree¬ ments upon trade, such effect being deter¬ mined by the character of the agreements and the purpose in view as shown by the agreements themselves and the facts of the situation which calls them forth and to which they were to be applied.
269
Supreme Court of the United States.
Oot. Term,
People v. Fisher, 14 Wend. 9, 28 Am. Dec. 601; Hooker v. Vandeioater, 4 Denio, 34!!, 47 Am. Dec. 258; Stanton v. Allen, 5 Denio, 434, 49 Am. Dec. 282; Cleveland, C. C. d I. R. Co. v. Closser, 126 Ind. 348, 9 L. R. A. 754, 3 Inters. Com. Rep. 387; Shrewsbury d B. R. R. Co. v. London <6 N. W. R. Co. 17 Q. B. 652, 6 H. L. Cas. 113; Hare v. London d IV. W. R. Co. 2 Johns. & H. 80; Manchester d L. R. Co. v. Concord R. Corp. 66 N. H. 100, 9 L. R. A. 689, 3 Inters. Com. Rep. 319.
Agreements simply designed and operative to restrain ruinous competition are not in any manner objectionable when entered into by persons engaged in ordinary business. They have been repeatedly sustained, and, it is believed, nowhere condemned. But agree¬ ments between such parties, when calculated and designed simply to raise prices by sup¬ pressing ordinary competition, are equally obnoxious to the law.
Wickens v. Evans, 3 Younge & J. 318; Skrainka v. Scliarringhausen, 8 Mo. App. 522 ; Sayer v. Louisville Union Benev. Asso.
1 Duv. 143, 85 Am. Dec. 613; Collins v. Locke, L. R. 4 App. Cas. 674; Central Shade Roller Co. v. Cushman, 143 Mass. 355; Gloucester Isinglass d G. Co. v. Russia Ce¬ ment Co. 154 Mass. 92, 12 L. R. A. 563.
The agreement is in no manner in viola¬ tion of the provisions of § 2 of the act. It creates no monopoly, nor is it an attempt or conspiracy to monopolize.
In the attempt made by the bill to array every possible objection to the agreement, there is an evident purpose to suggest that its 8th article, in connection with other sub¬ sidiary provisions, constitutes pooling, and therefore is a violation of § 5 of the Inter-, state Commerce Act. There is no founda¬ tion for such a charge. The agreement in no manner violates any provision of the In¬ terstate Commerce Law.
Davies v. Davies, L. R. 36 Ch. Div. 359.
Mr. Edward J. Phelps, for the New York Central. & Hudson River Railroad Company, appellee:
Whether the agreement by its terms vio¬ lates the Federal law depends entirely on the inquiry whether it conflicts with any stat¬ ute of the United States.
The bill is not based upon any statute, but proceeds apparently upon common-law grounds. No statute is referred to or charged to have been violated.
The United States has no common law.
Wheaton v. Peters, 8 Pet. 591, 8 L. ed. 1055; United States v. Hudson, 7 Cranch,
32. 3 L. ed. 259; Bucher v. Cheshire R. Co.
125 U. S. 555, 31 L. ed. 795.
The only statutes of the United States that are claimed to be infringed by the terms of the agreement are the Interstate Com¬ merce Act of February 4, 1887, amended by acts of March 2, 1889, February 10. 1891, and February 8, 1895, and the Anti-Trust Act of July 2, 1890.
The agreement violates no provision of the Interstate Commerce Act.
The only provision in that act which is claimed to be infringed is contained in § 5, which prohibits “pooling.”
“Pooling” means a division of the money 270
earnings of traffic which this agreement does not contemplate.
Even assuming that this clause in the agreement can be construed into a violation of § 5 of the Interstate Commerce Act, this suit would not be maintainable, because it is not authorized by that act, and is pre¬ cluded by its express provisions.
This court has no power to grant an in¬ junction, either interlocutory or upon final decree, at the suit of the United States gov¬ ernment, against the commission .of a crime, where no other grounds for the injunction exist except that the act sought to be en¬ joined is an offense, unless such power is specially conferred by the statute.
Nor does it come within the general equity jurisdiction of the court, since an injunction of that character is unknown in equity ju¬ risprudence.
United States v. Debs, 158 U. S. 564, 39 L. ed. 1092.
No power to grant an injunction against a “pooling” contract is conferred upon the court by the Interstate Commerce Act.
The Interstate Commerce Act does not au¬ thorize the commencement of any suit until an inquiry and decision of the Commission¬ ers has first taken place, which in this case has not taken place.
The Anti-Trust Act of July 2, 1890, doe3 not apply to the business of railroad trans¬ portation.
The ease of United States v. Trans-Mis¬ souri Freight Asso. 166 U. S. 290, 41 L. ed. 1007, is by no means controlling in this case. The points of difference are clearly pointed out in the brief of Mr. Edmunds, and need not be restated.
We ask of the court a reconsideration of the conclusions reached by the majority of the judges in that decision, which overrules the judgment of six United States circuit and district judges who sat in the different stages of that case and this, and is opposed to the opinion of four members of this tri¬ bunal, and also overrules the decision of Mr. Justice Jackson in the case Re Greene, 52 Fed. Rep. 109, which is directly in point.
Its consequences are far-reacning and dis¬ astrous. It deprives the citizens of this country of the right, never before questioned in an English or American court, of making a large class of just and reasonable con¬ tracts, often absolutely necessary to the use of property, the transaction of business, and the fair compensation of industry.
Many decisions of this court to this effect are cited by Mr. Justice W:hite, to which many more might be added.
Where a special statute fully covers the subject to which it is addressed, and a sub¬ sequent general statute contains words that might, if standing alone, receive a construc¬ tion broad enough to include the same mat¬ ter, the general will always give way to the special statute, and will be regarded as not intended to intrude on its province, unless that intention is clearly manifested. And especially will this construction be given where, as in the present case, the statutes, if taken to relate to the same thing, would not only be superfluous, but inconsistent.
171 U. S.
1898.
United States v. Joint-Traffic Association.
Endlich, Stat. §§ 113, 137, 225; Bishop, Written Law, § 126; Brewer v. Blougher, 14 Pet. 178, 10 L. ed. 408; Reiche v. Smythe, 13 Wall. 164, 20 L. ed. 566; Atkins v. Fibre Disintegrating Co. 18 Wall. 272, 21 L. ed. 841; United, states v. Saunders, 22 Wall. 492, 22 L. ed. 736; Townsend v. Little, 109 U. S. 504, 27 L. ed. 1012.
Says Chief Justice Marshall in United States v. Wiltberger, 5 Wheat. 95, 5 L. ed. 42 : “The rule that penal laws are to be construed strictly is perhaps not much less old than construction itself.”
And in United States v. Morris, 14 Pet. 475, 10 L. ed. 548, the court remarked: “It has been long and well settled that such [penal] statutes must be construed strict¬ ly.”
In Harrison v. Vose, 9 How. 378, 13 L. ed. 181, this court observed: “In the con¬ struction of a penal statute, it is well settled also that all reasonable doubts concerning its meaning ought to operate in favor of the respondent.”
In the case of The Enterprise, 1 Paine, 32, Judge Livingston said: “It should be a principle of every criminal code, and cer¬ tainly belongs to ours, that no person be ad¬ judged guilty of an offense unless it be cre¬ ated and promulgated in terms which leave no reasonable doubt of their meaning.”
“Statutes creating crimes will not be ex¬ tended by judicial interpretation to cases not plainly and unmistakably within their terms. If this rule i3 lost sight of the courts may hold an act to be a crime when the legislature never so intended. If there is fair doubt whether the act charged in the indictment is embraced in the criminal pro¬ hibition, that doubt is to be resolved in favor of the accused.”
Per Dillon, Justice, in United States v. Whittier, 5 Dill. 219. See also United States v. Sheldon, 2 Wheat. 119, 4 L.
ed. 199; United States v. Hartwell, 6 Wall. 395, 18 L. ed. 832; United States v. Shackford, 5 Mason, 445; United States v. Clayton, 2 Dill. 219; United States v. Oarretson, 42 Fed. Rep. 22; Dwarris, Stat. 641; Hubbard v. Johnstone, 3 Taunt. 177.
But if any doubt could still exist on this point, it is completely set at rest by refer¬ ence to the proceedings of Congress in both Houses, on the passage of the Anti-Trust Act.
2 Cong. Record, pt. 1, 96; pt. 4, 3153, 3S57 ; pt. 5, 4099, 4104, 4123, 4753, 4837; pt. 6, 5453, 5950, 5981; pt. 7, 6116, 6208,
6312.
The Supreme Court of the United States held in the case of Blake v. Rational Banks, 23 Wall. 307, 23 L. ed. 119, that reference to the Congressional Journals may be had, on a question as to the meaning of the language of a statute.
Gardner v. The Collector, 6 Wall. 511, 18 L. ed. 894; Church of the Holy Trinity v. United States, 143 U. S. 465, 36 L. ed. 230.
Views of individual cannot be taken into consideration.
Aldridge v. Williams, 3 How. 24, 11 L. ed. 476; United States v. Union P. R. Co. 91 U. S 79, 23 L. ed. 224; District of Columbia 1
171 U. S.
v. Washington Market Co. 108 U. S. 250, 2T L. ed. 717.
Assuming for the purposes of argument that the Anti-Trust Act. does apply to rail¬ way traffic contracts, no provision of that law is violated by the agreement now under consideration.
The prohibitions of the act are two : ( 1 )
Against contracts, combinations, or conspir¬ acies in restraint of trade or commerce; (2> the monopoly of, or the attempt or combi¬ nation to monopolize, ar.y part of the trade or commerce of the states or with foreign nations.
The agreement in this case is not “in restraint of trade or commerce.”
The theory of the bill seems to be that the agreement comes within this description be¬ cause it tends to restrict competition, and because any agreement which restrains com¬ petition is “in restraint of trade.” Both these assumptions are erroneous; the one in fact, the other in law.
The agreement does not restrain competi¬ tion to any such appreciable extent as would justify an injunction, except that competi¬ tion which is unlawful because it is secret.
Assuming, again, against the fact, that a certain restriction of competition is the necessary result of this agreement if it is al¬ lowed to proceed, it plainly appears by its terms to be only such restraint of competi¬ tion as is necessary to secure “just and rea¬ sonable rates.”
By the Interstate Commerce Act all rates are required to be “reasonable and just.” Every unjust and unreasonable charge is made unlawful. Schedules of rates are re¬ quired to be published and kept open to the public inspection, and to be filed with the Commissioners, and not to be changed with¬ out due notice to the public and the Commis¬ sioners. iVniple remedies, criminal and civil, are provided for the violation of these re¬ quirements, the enforcement of which is made the duty of the Commissioners. Ai)d the companies are also made subject to the state laws regulating rates.
The precise question, therefore, under this clause of the Anti-Trust Act, is whether a contract that produces a result which the Interstate Commerce Act in terms author¬ izes and provides for, and helps to repress a practice which that act forbids, is for that reason a contract for the unlawful restraint of trade. Or, in other words, whether it can be made unlawful by a forced construc¬ tion of the general provisions of one stat¬ ute of the United States, for a carrier com¬ pany to provide by a traffic contract for the maintenance of those “just and reasonable rates” which another statute of the United States not only authorizes, but creates elabor¬ ate means for making permanent, and for preventing the secret changes of rates which the Interstate Commerce Act prohibits.
It is the statutes themselves that have prescribed a definition of this clause of the Anti-Trust Act, so far as it applies to rail¬ way traffic contracts, if it is held to apply to them at all, whatever its meaning as to other contracts may be.
That the just and reasonable fates of
271
Oct. Term,
Supreme Court ok the United States.
transportation which the Interstate Com¬ merce Act contemplates and provides for are rates that are just ard reasonable to the carriers as well as to the carried cannot be open to doubt. The very words “just and reasonable,” employed in that act, neces¬ sarily imply that meaning. They are words of comparison and relation, and unless the rights of both parties to a contract are con¬ sidered there can be no comparison.
It would be preposterous to call a price just and reasonable, that was not so to one side as well as to the other. This is the construction which this court has given to the Interstate Commerce Act in this very particular.
Texas & P. R. Go. v. Interstate Commerce Commission, 162 U. S. 197, 40 L. ed. 940, 5 Inters. Com. Rep. 405.
In the same opinion some observations of Mr. Justice Jackson, in the case of Interstate Commerce Commission v. Baltimore & 0. R. Co. 43 Fed. Rep. 37, 3 Inters. Com. Rep. 192, were cited with approbation.
This decision of Mr. Justice Jackson was affirmed in the United States Supreme Court.
Interstate Commerce Commission v. Bal¬ timore & 0. R. Co. 145 U. S. 263, 36 L. ed. 699, 4 Inters. Com. Rep. 92.
The validity of the agreement here in ques¬ tion must be determined, therefore, not mere¬ ly upon the language of the Anti-Trust Act taken by itself, but by that language con¬ sidered in connection with the other statute of the United States (which if this applies) is in pari materia, and which deals with the subject so much more exhaustively, and in words so plain that there can be no am¬ biguity raised in respect of them.
Granting that the Anti-Trust Act in terms makes all contracts unlawful that are in anywise “in restraint of trade,” however reasonable and necessary they may be, is that to be understood to invalidate a railway contract made to secure that, and only that, which the Interstate Commerce Act as con¬ strued by this court recognizes as the right of railway companies to receive, and pro¬ vides means to secure?
It will hardly be claimed that the elabo¬ rate provisions of the Interstate Commerce Act on the subject of reasonable rates are repealed by the Anti-Trust Act. If both are to stand as applicable to this case, they must be read together, the same as if their provi¬ sions were contained (so far as they refer to the same subject) in separate sections of the same act.
Quite aside from the provisions of the In¬ terstate Commerce Act giving to the com¬ panies the right to just and reasonable rates, and to use proper means to maintain them, the same result is reached under the princi¬ ples of common law.
The term “restraint of trade” employed in the Anti-Trust Statute has a common-law definition. And as the act furnishes no other, that, upon the general rules of con¬ struction, must be taken to be intended. To make the agreement an infringement of this statute, it must therefore be one that would be void at common law.
272
In the construction of statutes the rule is absolutely without exception, that where a word or phrase employed has a well-settled common-law definition distinct from its lit¬ eral meaning, it is assumed to be the mean¬ ing intended, unless a different definition is prescribed in the statute.
Even the Constitution of the United States has been from the outset subjected by this court to this rule of construction.
Cooley, Const. Lim. 75.
The definition at common law, of a con¬ tract “in restraint of trade,” is settled by a long course of decisions, and is no longer open to discussion. It is a contract which restricts trade beyond what is reasonable and just under the circumstances of the par¬ ticular case.
Powle v. Parke, 131 U. S. 88, 33 L. ed. 67 ; Oregon Steam Nav. Co. v. Winsor, 20 Wall. 64, 22 L. ed. 315; Mogul S. S. Co. v. Me- Gregor, L. R. 21 Q. B. Div. 553, L. R. 23 Q. B. Div. 598 [1892] A. C. 25.
Even if it should be held that the Anti- Trust Act forbids any contract in restraint of trade, however just, reasonable, and nec¬ essary, the agreement here in question would not fall within the prohibition, because it does not tend to restrain trade or commerce, but rather to promote them.
A restraint upon excessive and unwhole¬ some competition is not a restraint upon trade, but is necessary to its maintenance.
There is no ground whatever for assert¬ ing that the agreement infringes the provi¬ sions of the Anti-Trust Act against monopo¬ lies.
The definition of the word “monopoly,” both in its legal and its ordinary significa¬ tion, is the concentration of a business or employment in the hands of one, or, at most, of a few. That is the plain meaning of it as employed in the act. No feature of the agreement, in any view that can be taken of it, approaches this definition.
So far from tending toward the concen¬ tration of railroad transportation in fewer bands, it does not in any possible event with¬ draw it from a single road now in existence, nor throw the least obstacle in the way of the construction of others.
Its effect will be, if it is successful, not to diminish, but to increase transportation fa¬ cilities by preserving roads that otherwise might be driven from the field.
If the construction of the Anti-Trust Act, which was adopted by the court in the Trans- Missouri case is to stand, the act, so far as thus interpreted and applied, is in violation of the provisions of the Constitution of the United States, since it deprives the defend¬ ants in. error of their liberty and their prop¬ erty without due process of law, and deprives them likewise of the equal protection of the laws.
This point was not made on the argument of the Trans-Missouri case because no such construction of the act was anticipated by counsel. Nor was it considered by the court, since it is an unvarying rule that no objec¬ tion to the constitutionality of a law will be considered unless raised by the party af¬ fected.
171 TJ. S.
1898.
United States v. Joint-Traffic Association.
The question thus presented is not whether •the act in general, or in its application to the many other cases to which it is obviously ad- •dressed, is unconstitutional, but whether the agreement here under consideration is one that may be prohibited by legislation with¬ out infringing the freedom of contract and the right of property, which the Constitution declares and protects.
The record before the court conclusively establishes the fact that the agreement here in question was designed and intended and is necessary, as determined by long practical experience, to the maintenance of just and reasonable rates, and to the proper discharge of the business of the companies.
And in the Trans-Missouri Case, where the contract under consideration was similar to the one here in controversy, though far more open to the objections here urged, it was conceded, both in the majority and mi¬ nority opinions of the court, that its sub¬ stantive character and purpose were such as the answers in the ease aver and set forth.
It was for this reason believed by the mi¬ nority of the judges that it could not have been the intention of Congress that such a contract should be made a penal' offense. But it was held by the majority that the language of the act admitted of no other con¬ struction, though it was conceded in the opinion of the court that the arguments against that conclusion “bear with much force upon the policy of an act which should prevent a general agreement of rates among competing railroad companies, to the extent simply of maintaining those rates which were reasonable and fair.”
And in the opinion of the minority of the court, by Mr. Justice White, he remarks, after stating the general features of the con¬ tract: “I content myself with giving this mere outline of the contract, and do not stop to demonstrate that its provisions are rea¬ sonable, since the opinion of the court rests upon that hypothesis.”
The accuracy of the statement we have made above, of the legal effect upon this case of the Anti-Trust Act as so construed, is thus both established and conceded.
And the question distinctly arises whether legislation having such result is within the power of Congress.
The operation of the act as thus inter¬ preted does in fact, by prohibiting the con¬ tract here in question, deprive the defend¬ ants, whether rightfully or not, of both lib¬ erty and property to a very grave and per¬ haps ruinous extent.
A just freedom of contract in lawful busi¬ ness is one of the most important rights re¬ served to the citizen under the general term of “liberty,” for all human industry depends upon such freedom for its fair reward.
The use of property is an essential part of it, and when abridged the property itself is taken. Its use is abridged when the owner is precluded from any contract that is neces¬ sary or desirable in order to secure to him a just compensation for its employment.
And when any class in the community is so precluded it is to that extent “deprived of the equal protection of the laws.”
171 U. S. U. S., Book 43. 18
These are elementary propositions in con¬ stitutional law, and have often been asserted by this court.
Pumpelly v. Green Bay d M. Canal Co. 13 Wall. 166, 20 L. ed. 657; Stone v. Farmers’ Loan d T. Co. 116 U. S. 307, 29 L. ed. 636; Chicago, M. d St. P. R. Co. v. Minnesota, 134 U. S. 459, 33 L. ed. 982, 3 Inters. Com. Rep. 209; Reagan v. Farmers’ Loan d T. Co. 154 U. S. 397, 38 L. ed. 1023, 4 Inters. Com. Rep.
360.
The only authority of Congress over the agreement in controversy is such as may be deduced from its power “to regulate com¬ merce,” and is limited by the reasonable necessities of such regulation.
As contracts of this sort are not in them¬ selves wrongful, have never before been held or deemed unlawful, and have been custom¬ ary in all kinds of business in which they have been found useful, the right to prohibit them, if it exists at all, must arise under what is called the police power.
But the general power of police regulation is not vested in Congress. It is reserved to the states.
United States v. E. C. Knight Co. 156 U. S. 11, 39 L. ed. 329.
No exercise of the police power, whether the authority on which it rests is general or special, c-an be allowed to infringe rights se¬ cured by the Constitution of the United States.
No public good can be attained and no public necessity relieved by unconstitutional means.
New Orleans Gas Co. v. Louisiana Light d E. P. d Mfg. Co. 115 U. S. 661, 29 L. ed. 521; Walling v. Michigan, 116 U. S. 446, 29 L. ed. 691 ; Mugler v. Kansas, 123 U. S. 661, 31 L. ed. 210.
There is no case known to English or American law, in which any man can main¬ tain a claim that the use of property should be furnished or services performed for him at less than a reasonable compensation, un¬ less under a specific contract for a less sum.
Railway companies, though creations of the legislatures, from which they derive their powers and to whose enactments they are subject, are no exception to this rule. Though the legislatures may regulate and to a reasonable extent prescribe their rates, it has been repeatedly held by this court, and is now fully settled, that they cannot be re¬ duced below a just and reasonable amount, fixed in view of all the circumstances of the case.
Reagan v. Farmers’ Loan d T. Co. 154 U.
S. 362, 38 L. ed. 1014, 4 Inters. Com. Rep. 560; Chicago, M. d St. P. R. Co. v. Minne¬ sota, 134 U. S. 459, 33 L. ed. 9S2, 3 Inters. Com. Rep. 209; Stone v. Farmers’ Loan d
T. Co. 116 U. S. 307, 29 L. ed. 636.
The true test of the constitutionality of a law which abridges the freedom of contract must necessarily be found in the reasonable¬ ness and justice of the contract abridged.
The legislature cannot create restrictions upon the freedom of contract which the es¬ tablished rules of law and dictates of jus¬ tice do not justify, and which result in tak-
273
Supreme Court of the United States.
ing one man’s property for the unjust bene¬ fit of another.
The legislature cannot prohibit all con¬ tracts it may desire or attempt to prohibit.
Gibbs v. Consolidated Gas Co. 130 U. S. 409, 32 L. ed. 984; Austin v. Murray , 16 Pick. 121; Waters v. Wolf, 162 Pa. 153; State v. Goodwill, 33 W. Va. 179, 6 L. R. A. 621; Com. v. Perry, 155 Mass. 117, 14 L. R. A. 325; Allgeyer v. Louisiana, 165 U. S. 578, 41 L. ed. 832; Shaver v. Pennsylvania Co. 71 Fed. Rep. 931; Re Jacobs, 98 N. Y. 98, 50 Am. Rep. 636; People v. Marx, 99 N. Y. 377, 52 Am. Rep. 34; People v. Gillson, 109 N. Y. 389; Godcharles v. Wigeman, 113 Pa. 431; John Spry Lumber Co. v. Sault Sav. Bank Loan & T. Co. 77 Mich. 199, 6 L. R. A. 204; Kuhn v. Detroit, 70 Mich. 534; Millett v. People, 117 Ill. 294, 57 Am. Rep. 869; State v. Julow, 129 Mo. 163, 29 L. R. A. 257 ; Loio v. Rees Printing Co. 41 Neb. 127, 24 L. R. A. 702; Ex parte Kuback, 85 Cal. 274, 9 L. R. A. 482; Loop v. St. Louis, I. M. £ S. R. Co. 58 Ark. 407, 23 L. R. A. 264; Yick Wo v. Hopkins, 118 U. S. 356, 30 L. ed. 220.
These cases fully support the proposition that just, reasonable, and lawful contracts in relation to property or business cannot be made unlawful by legislative enactments.
The police power when invoked to prohibit any act which is otherwise lawful, while it may fall short of the demands of public ne¬ cessity by reason of constitutional limita¬ tions upon its exercise, can never exceed that necessity.
Chy Lung v. Freeman, 92 U. S. 280. 23 L. ed. 552; People v. Jackson £ M. PI. Road Co. 9 Mich. 285.
The public is not entitled to the alleged benefit which is claimed to be the result of the prohibition of this agreement.
The alleged public interest which is sought to be made the basis of this extravagant measure is not the interest of the public, but of one class, which can only be secured at the expense and unjust loss of another.
Interstate Commerce Commission, 7 th Ann. Rep. 32.
Railroad companies have, for a long time past, been entirely unable, in consequence of the number of roads and the excessive com¬ petition, to maintain rates that are fairly remunerative.
Nor is it true that even the shippers them¬ selves are interested, in the long run, in ob¬ taining the carriage of their goods at rates unreasonably low.
But such agreements between competing railway companies are in fact necessary as has been demonstrated by long and dis¬ astrous experience.
Re Southern R. £ S. S. Asso. 1 Inters. Com. Rep. 288; Report of Interstate Com¬ merce Commission, 1 Inters. Com. Rep. 653- 671; Re Chicago, St. P. £ K. C. R. Co. 2 Inters. Com. Rep. 148; Second Annual Re¬ port of Interstate Commerce Commission, 2 Inters. Com. Rep. 249, 256; Third Annual Report of Interstate Commerce Commission, 23, 25, 41 ; Fourth Annual Report of Inter¬ state Commerce Commission, 4, 19, 21, 33; 1-Mfth Annual Report of Interstate Commerce 274
Oct. Term,
Commission, 263; Judge Cooley in Railway Rev. April 26, 1884.
In recapitulation of the points above pre¬ sented upon the question of the constitution¬ ality of the Anti-Trust Act, if it is held ap¬ plicable to the agreement .in this case, we respectfully insist —
] . That the act deprives the defendant of both liberty and property by forbidding a contract just and reasonable in itself, es¬ sential to the use of their property and the prosecution of their business, and never be¬ fore held or claimed to be unlawful or wrong, and by which they only agree to do what they have a right to do.
That no such contract can be prohibited by law without a violation of the constitutional provision, whatever advantage to the public in keeping down rates of transportation may be expected to result from it.
And that in attempting such a prohibi¬ tion, the case contemplated by the Consti¬ tution is distinctly presented, in which the legislature deems that a public 'benefit is to be effected by depriving the citizen of his liberty or property without due process of law.
2. That even if such a deprivation could
be justified in any case, the public good in this case does not in any sense require it, because —
(a) Those intended to be benefited are not the public, but only one class of the public who are seeking a business advantage over another and much larger class, which is equally entitled to protection.
(b) Even if such a class is hold to con¬ stitute the public, it is not entitled to the suppression of all restriction upon competi¬ tion, because such a suppression would be a plain and oppressive v’olation of the equal rights of the other class, inasmuch as it would compel the latter to serve the former by labor and property without a just com¬ pensation.
(c) The legislation in question is not nec¬ essary, even if it is admissible. The com¬ plete suppression of all the restriction upon competition to which the public has a right to object is already effectually provided for by full and careful congressional legisla¬ tion, in which no defect or insufficiency can be pointed out; so that the further suppres¬ sion now proposed only extends to those re¬ strictions, just and reasonable in themselves to which the public have not a right to ob¬ ject. And even without that or any legis¬ lation, it would be utterly impossible under existing facts, notorious and undisputed, for railway companies to restrict competi¬ tion to a degree that would result in any in¬ jury to the public.
(d) That if all restrictions upon compe¬ tition were prohibited, the result, instead of a public advantage, would be a public calam¬ ity, and would injure rather than benefit the very class in whose behalf it is contended for.
3. That if it were admitted that further
legislation against restriction against com¬ petition was both constitutional and neces¬ sary, the provisions of this act in forbidding all such restrictions are not justly adapted to the only end that is admissible on the
171 U. S.
1898.
United States v. Joint-Traffic Association.
score of the public good, — the maintenance of just and reasonable rates, — but must result in an infringement of the liberty and prop¬ erty of the defendants, to a degree far be¬ yond what is necessary to that end, and in no way conducive to it.
Whatever the merits of the agreement in question may be, no case for an injunction is presented.
Even though the authority to make the decree sought exists, the bill is insufficient to invoke it.
Story, Eq. PI. § 271, note; Id., § 27a, note; Campbell v. Mackay , 1 Myl. & C. 618.
Mr. George F. Edmunds, for the Penn¬ sylvania Railroad Company, appellee:
Before the agreement in question was made the rates of each road had been independ¬ ently and fairly established by itself, and duly filed with the Interstate Commerce Com¬ mission; and these rates were in truth just, reasonable, and in conformity with law in every respect, and were in full operation. This is admitted by the pleadings.
This being true, these rates could not have been either raised or lowered, under the ex¬ isting conditions, without injustice to pa¬ trons or else injustice to those interested in the roads, including the people along their lines, as well as through shippers.
To have changed any of them would have been against justice and reason, disobeying the first commandment of the commerce law.
In this state of things the agreement was made. The preamble contains five distinct declarations as follows :
( 1 ) To aid in fulfilling the purposes of the Interstate Commerce Act; (2) to co¬ operate with each other and adjacent trans¬ portation associations; (3) to establish and maintain reasonable and just rates, fares, rules, and regulations on state and in¬ terstate traffic; (4) to prevent unjust dis¬ crimination, and to secure the reduction and concentration of agencies; (5) and the intro¬ duction of economies in the conduct of the freight and passenger service.
Every one of these declarations is ad¬ mitted to have been true in all respects ; and it is admitted that there was no other pur¬ pose, and no secret or covert design in re¬ spect to the subject. The preamble thus be¬ came, certainly as between the parties to it, the constitutional guide in the interpreta¬ tion of the body of the contract.
The parties next declare that they “make this agreement for the purpose of carrying out the objects above named.”
The first six articles of the contract pro¬ vide for organization and administration, in respect of which no criticism has been sug¬ gested except as to § 5 of article 5 in con¬ nection with the Solicitor General’s conten¬ tion in regard to article 7.
Article 7 is the first one that is assailed in respect of its fundamental character. It is the fundamental one in regard to rates. If it violates law it is bad, and must not be put in execution. If it provides for the full¬ est obedience to law and promotes trade, it must be upheld.
The first section provides: “Section 1.
The duly published schedules of rates, fares,
171 U. S.
and charges, and the rules applicable there¬ to, now in force and authorized by the com¬ panies parties hereto upon the traffic covered by this agreement (and filed with the Inter¬ state Commerce Commission as to such of said traffic as is interstate), are hereby re¬ affirmed by the companies composing the as¬ sociation, and the companies parties hereto shall, within ten days after this agreement becomes effective, file with the managers copies of all such schedules of rates, fares, and charges, and the rules applicable there¬ to.”
_ This section is the immediate and affirma¬ tive act of the association. Its essence is that all parties agree to abide by the pre¬ existing just, reasonable, and lawful rates then on file with the Interstate Commerce Commission. It has not been contended by the learned Solicitor General that this sec¬ tion is contrary to law. It is submitted with confidence that no such contention can be made, and that if the association agree¬ ment had stopped there, the agreement would have been simply one to stand by just and reasonable rates independently fixed, on file with the Interstate Commerce Commis¬ sion, which would be agreeing to do the very thing that the plain words of the statute commanded should be done. The commerce law does not demand competition; it only demands justice, reason, and equality. Every one of its clauses is devoted directly to these ends; and the competition that pro¬ duces departure from the reason and justice and equality that the act requires violates the essential principle upon which it is founded.
1 take it to be plain that if these thirty- one defendants had united in an engagement to truly and faithfully adhere to and carry out in their respective conduct all the re¬ quirements of the commerce law, and had agreed to the imposition of penalties for in¬ fraction, it would be manifest that they had not contracted to restrain trade, either in a general or a partial sense, or in any sense whatever. In this first provision of the agreement, they have engaged to do that very thing, and that very tiling only, in the form of specific language referring to a specific and existing just, reasonable, and lawful state of things which they were then acting upon.
Section 2, of article 7 is the one upon which the principal assault of my learned brother on the other side is made. He main¬ tains that the language used in describing the powers and duties of the managers is intended to be evasive and to conceal its real purpose, and to make the managers the absolute masters, subject to an appeal to the board of control (being the presidents of all the roads), of the changing and fixing of future rates. The first answer to this is that the pleadings distinctly admit that there was no evasive intention, or any other unjust purpose, in any part of the arrange¬ ment. It is therefore not just to maintain what the record admits to be untrue.
But whatever construction or implication may exist in respect of the language of this
275
Oct. Term,
Supreme Court of the United States.
section, it is sufficient to say that the very next section of the same article declares —
“That the powers conferred upon the man¬ agers shall be so construed and exercised as not to permit violation of the Interstate Commerce Act, or of any other law appli¬ cable to the premises, or any provision of the charters or the law applicable to any of the companies parties hereto; and the managers shall co-operate with the Inter¬ state Commerce Commission to secure stabil¬ ity and uniformity in the rates, fares, charges, and rules established hereunder.”
Here is, in words as clear and specific as the English language is capable of, a distinct jurisdictional limitation upon the powers of the managers as described in the preceding section, and in terms the clause provides that the powers conferred upon the managers shall be so construed and exercised as not to permit the violation of the Interstate Com¬ merce Act, or any other law, and so forth; and it commands the managers to co-operate to these ends with the Interstate Commerce Commission.
When the managers, then, come to act un¬ der these powers, how do they start?
They start with rates established, not by the agreement, but before it was made, and confirmed by it, which were confessedly in conformity with and in promotion of the Commerce Act, and which were absolutely just and reasonable. The managers are to have authority to recommend such changes in those rates and fares as, by the very words of the 2d section, may be reasonable and just and necessary for governing the traffic and protecting the interests of the parties. Reasonableness and justice is the first and fundamental condition of their starting to act at all ; and it is declared that they shall not act otherwise than in conformity with the requirements I have already mentioned, contained in the Commerce Act.
Can this be an authority to restrain trade, under any definition of the word “restraint?” The only restraint is a restraint against vio¬ lation of law by the managers in agreeing upon unreasonable and unjust rates against the requirements of the Commerce Act. If we assume that the restraint of trade men¬ tioned in the Trust Act may be a restraint of innocent and just proceeding, can any¬ one maintain that it makes illegal an agree¬ ment, not to violate law, but to obey it?
It was obvious when this agreement was made, that rates then existing and being in all particulars reasonable and equal might in the course of changes in production, trade, and other conditions over which the railways could have no control , become unjust and unreasonable and inapplicable to the new conditions, and that in such a case both public and private interests would require that readjustments should be made in order to bring the rates into conformity with what reason, justice, and law should require under such conditions. It was to provide for this that §§ 2 and 3 of the 7th article were in¬ serted. They were inserted in such clear language that it would be impossible for the managers to agree upon any rates in lieu of the just one then existing, that were not, in 276
the same sense and to the same extent, just, reasonable, and for the public interest, as those then existing. The managers must act in that way and to that end, or else they were forbidden by the very terms of the agreement to act at all.
If the managers, contrary to their author¬ ity, should have agreed upon a new rate which any one of the independent roads thought to be wrong in itself as being unrea¬ sonable and not in conformity with the re¬ quirements of the article and of law, that company or any number of companies af¬ fected could lawfully and justly (as would be its bounden duty) refuse to conform to the rate of the managers. But, it is asked, would not this road thus refusing be sub¬ jected to fines and forfeitures provided in another part of the agreement, and would not it be turned out of the association? I answer emphatically, no. If any such thing were attempted under the circumstances named, the company could defend itself in a court of justice against any such wrongful exaction, and could compel the managers and its associate roads to obey the contract, and to give it its just equality of treatment that it was before entitled to. The Commerce Act itself requires in terms the same rea¬ sonable and just conduct by railways towards each other as it does in their treat¬ ment of their customers and the public. I most earnestly maintain, therefore, that the whole and every part of article 7 is perfectly valid under any possible construction of the language of the Trust Act, as well as in per¬ fect conformity with and in aid of the Com¬ merce Act.
I may as well here compare the provisions of- article 7, which contains the great lead¬ ing feature of the whole agreement, with the agreement in the Trans-Missouri case. The difference is broad and fundamental. In this case, as I have shown, the rates agreed to be adhered to in § 1 of article 7 had al¬ ready been independently established, were in fact reasonable and just, were on file and inferentially approved by the Interstate Commerce Commission and they had been assailed by nobody, and the whole trade of the country affected was proceeding under them with advantage to the shippers, to the people along the lines of the roads, to the railways themselves, and to the general in¬ terest of the country. It was an engagement to stand by that state of things, and for the express purpose of continuing that happy state of things, — exactly those that the law requires, — that this engage¬ ment was made. Turn now to the Trans- Missouri agreement on the same part of the subject. That agreement did not pro¬ pose or profess to stand by any then existing rates, it did not indicate that the rates then existing were just or reasonable, but it pro¬ posed to put into the hands of its managers the power to establish de novo reasonable rates, etc., and, in the very words of the agreement, for the purpose of mutual pro¬ tection and nothing else.
The Trans-Missouri agreement imposed no restriction upon the discretion of its rate¬ making board; it did not impose and evi-
171 U. S.
1898.
United States y. Joint-Tiiaffic Association.
dently did not intend to impose, the distinct barriers of the law between the powers of its rate board and the people and any one of the roads concerned. It did not profess to look to any other interest than the exclusive in¬ terest of the parties themselves; and it will be seen, on a careful study of it, that it was construed and constructed for the sole pur¬ pose of keeping and increasing rates, instead of for the purpose of (as in the Joint Traffic Association) of keeping them just and in conformity with law, whether by reduction, increase, or other readjustment.
Other essential differences are stated in my brief, which I need not take the time of the court to enlarge upon.
These differences are illustrated by what the pleadings in the two cases show. In our case, the practical operation of the agree¬ ment has been to continue the same compe¬ tition that existed before. This is admitted. It has been to continue the same just and reasonable rates previously established, and to give a co-operative and advantageous serv¬ ice upon equal terms to everybody and of equal benefit to the whole public. The bill in the Trans-Missouri case alleged — there be¬ ing, it will be remembered, no previously es¬ tablished rates that were agreed upon — that the parties had refused to establish and give their customers just rates. The an¬ swer did not meet the charge, but evaded it in the manner that the court will see stated on page 34 of my brief. The practical con¬ structions by parties to contracts in their operations under them has always been con¬ sidered an important element in determining the true character and meaning of the con¬ tract. What I have now stated shows the operating difference between the two con¬ tracts.
The next principal contention of my learned brother is that article 8 of the agree¬ ment violates the Trust Act by restraining trade.
The words of the article are as follows: “Article 8. Proportions of competitive traffic. The managers are charged with the duty of securing to each company party hereto equit¬ able proportions of the competitive traffic covered by this agreement so far as can be legally done.”
This article provides that the managers shall endeavor so far, and only so far, as obe¬ dience to the law — that is to say, conformity with the Commerce Act and conformity with the Trust Act — will permit, to secure equita¬ ble proportions of the competitive traffic to each one of the companies. It is sufficient an¬ swer to my brother’s contention to say that the very terms of the article do not require or invite or allow the managers to act under it at all otherwise than the law shall permit. If therefore the Trust Act condemns the ef¬ forts referred to, then not to make the ef¬ forts. If the Interstate Commerce Act, ei¬ ther in terms or spirit, is adverse to such an effort, the managers are not authorized to take a step. Does it violate the law to mere¬ ly authorize an agent to do something in the course of business so far, and so far only, as the law will permit?
But I contend that it was in conformity
171 U. S.
with the law that each company should have an equitable proportion of the traffic. What does equitable mean? It means that which right and justice and the public interest re¬ quire. What did justice and public policy require? And what does it still require in respect of the nine great lines connecting the western lakes and the valley of the Missis¬ sippi and the whole continent beyond with the Atlantic seaboard? Was it not just and necessary to public interest that each one of these roads passing through great extents of country, and having along them populations and interests to whose wel fare the existence of each one of these roads was necessary, should be considered with reference to the through traffic which should come from beyond? The question answers itself. It is obvious, then, that just so far as each road should be ena¬ bled to carry the through traffic that natur¬ ally belonged to it, by just so far the people along the whole length of its line would be benefited by increasingthe income of the line, and thereby contributing to its support and to its ability to make lower rates to all its people from one end of the line to the other. This provision of the 8th article, then, was wholesome, lawful, and necessary, and it was the very thing which one of the clauses in the Commerce Act and the spirit of all its provisions required.
I may be allowed to say a word in respect of the objection that no one of the roads could change its rates without giving thirty days’ notice, and therefore that this was a restraint of trad© in one sense or another. It will be seen on examining the agreement, that each road had the absolute right, under the agreement and pursuant to its provisions, to change its own rates, and still continue a member of the Association. This being so, it seems to me impossible to contend that any part of the agreement was any sort of re¬ straint, unless it can be established that the thirty days’ notice was too long. It is a matter of history that when the Commerce Act was passed there was inserted in it the requirement that no rate should be raised ex¬ cept on ten days’ notice, and none should be lowered except on three days’ notice, publicly displayed. What was the principle of this? It was that justice and fair play to custom¬ ers and to the public ana to all persons di¬ rectly or indirectly interested in transporta¬ tion required that sufficient and timely knowledge of changes in rates which, as we know, affect in a greater or less degree all commercial and productive transactions, should be had by every person and commun¬ ity interested. I suppose I may properly state it as a public fact, now known to every¬ body engaged in business, that the time fixed in the Commerce Act for notice was much too short, and that unjust inequalities have arisen, again and again, from charges in rates by particular roads on short notice, that favored customers and favorite local¬ ities, etc., would get advantages over others, in violation of the spirit and substance of the Commerce Act. It was for the purpose, then, and with the effect of producing the widest fair play and equality among all per¬ sons, all roads, and all communities, that
277
Supreme Court of the United States.
Oot. Term,
this period of thirty days, instead of ten, was agreed upon. It was obviously right, and being right, it should not be condemned, unless the rigor of a law that cannot be oth¬ erwise construed and applied compels it.
I submit with sincere confidence, as re¬ gards the provision I have just spoken of, as well as regards all the other provisions of the contract, that, instead of being even a partial restraint of trade, they are all pro¬ visions of constraint in support and in pro¬ motion of trade. Trade is a general word, and its operation, like all other operations that require co-operating and associating forces and arrangement, are advanced by, and indeed, cannot be carriedon truly and hon¬ estly for public interest without checks and regulations, some of which may restrain and regulate the behavior of a particular element in the whole operation, and by doing so do not restrain, but advance and promote, the whole; just as, to take the simplest of illus¬ trations that occurs to me, in mechanics the safety valve of a locomotive, with its counter¬ weight, regulates and restrains or gives off the accumulating steam in the boiler, in the first place conserving it, restraining it from escape, and in the second place, enabling it to escape. But all this does not restrain the operations of the locomotive; it is necessary to its best and safest performance of duty. A hundred illustrations might be given.
My brother on the other side suggests that the clause in the agreement providing for abolishing soliciting agencies is a re¬ straint of trade. I have stated in my printed points my answer to this. I may add, how¬ ever, that soliciting trade or ceasing to so¬ licit trade is not trade itself, and does not be¬ long to it even as an incident. Wherever it is practised it is practised apart from any act of trade ; it precedes it, and sometimes leads up to it, and sometimes repels it. It was perfectly competent, therefore, and certainly wise, for these roads to agree to abolish such agencies, and to join, so far as it might be convenient to do for the informa¬ tion of the public, in having agencies at various points of importance to assist ship¬ pers and manufacturers in the most rapid and economical transmission of their pro¬ ductions. The plan, therefore, substituted for the old practice is one far more advan¬ tageous to the public who wish for hon¬ est and equal dealing than the old prac¬ tice. But 1 submit that whatever character may be imputed to soliciting business, it does not fall within the authority of Congress to regulate it at all. While it is going on the business solicited has not reached the point of being interstate commerce, and cannot reach it until its movement has commenced, or is about to commence, definitely from one state to another.
I refrain from making any observation on the constitutional question arising if the Trust Act is to be construed as' forbidding innocent contracts promotive of public pol¬ icy, which I have insisted upon in my printed points, for the reason that in the division of our subjects of discussion this matter will be left entirely to my brother, Mr. Phelps.
Jn respect to the meaning of the words of 278
the Trust Act, I beg Your Honor’s careful at¬ tention to the suggestions I have ventured to make in my printed points. I need not enlarge upon them, and have only to call your atten¬ tion, first, to the grammatical construction of the first section, and second to the citations I have made from law writers, showing a dis¬ tinct and separate classification of the two phrases, “restraint of trade” in general, and “partial restraint of trade.” If these writers are correct (as nobody doubts, I think, they are) , and these two phrases were known and treated in the law at the time of the passage of the act as separate things, the one obnoxious and the other just and wholesome, then I respectfully and earnestly insist that the universal rule of construction requires thait the words in the act shall be assigned to the first class and not carried over into the second.
Mr. John K. Richards, Solicitor Gen¬ eral, for the United States, appellant in re¬ ply:
1. It is claimed that because nothing has
been done under the agreement, no irrepara¬ ble injury has been or can be shown, and therefore no injunction lies. But the anti¬ trust law makes the agreement illegal, and vests the court with jurisdiction to prevent violations of the act. The carrying out of an illegal contract will result in irreparable injury to the public, and this sufficiently appears from the provisions of the law de¬ claring the illegality and authorizing the in¬ junction proceedings.
Mr. Carter said he would not reargue the questions considered in the Trans-Missouri case, and then proceeded to discuss what constitutes an agreement among railroads in restraint of trade, insisting that one which only prevents competition for the pur¬ pose of maintaining reasonable rates is not one in restraint of trade.
In the Trans-Missouri case this court held that such an agreement is in restraint of trade, regardless of its purpose and the ac¬ tual result of its operation. So, after all, the argument of Mr. Carter was directed to a discussion anew of the questions argued and considered and settled by this court in the Trans-Missouri case.
2. It is insisted that an agreement in re¬
straint of trade must restrain trade, — that is, reduce, or diminish it; that trade must be injured.
An agreement in restraint of trade may or may not diminish or reduce trade. The in¬ jury sought to be averted by prohibiting such agreements is the injury to the public. The stifling of competition, the creation of a monopoly, may increase the trade in the product controlled, but nevertheless to the injury of the public. To stifle competition is to create a monopoly and place the public at the mercy of the monopoly. The benefits resulting from cheaper products through mo¬ nopolies have never been held by courts or legislatures as sufficient to overbalance the evils to the government and people from the creation of monopolies. It is a question of method, rather than result. Trusts and mo¬ nopolies are forbidden in order to preserve competition, and thereby, as far as possible,
171 U. S.
1898.
United States v. Joint-Tuaffic Association.
freedom of action in industrial and commer¬ cial life.
3. It is said that competition is not trade,
but a mere incident of trade; that what pre¬ vents competition does not necessarily injure trade; on the contrary to restrict competi¬ tion may benefit trade; that the whole world is row groaning under competition ; that the hard rule of the survival of the fittest bears heavily upon the masses of the people; that there is a spirit of unrest, of dissatisfaction, and that, to avoid the effects of a ruinous competition among employers and employees, combination is the rule.
It may be conceded that the law of the sur¬ vival of the fittest is a hard one; that the necessity of competition under existing cir¬ cumstances presses heavily upon the weak. But, after all, competition is not only the life of trade, but the underlying basis of our so¬ cial and industrial life. There may be a better wav, but we have not yet found it.
Competition goes along with freedom, with independent action. This country was founded on the principles of liberty and equality. It sought to secure to every citi¬ zen an equal chance under the law. That is all the people have demanded or do demand, — a fair show in the race of life. Undoubt¬ edly there is unrest, dissatisfaction, tenden¬ cies to anarchy and socialism, but these re¬ sult, not from competition, but the throt¬ tling of competition by trusts and combi¬ nations, which seek to control the production and transportation and dominate both work¬ ingmen and consumers. Against these the individual citizen protests. He does not de¬ mand no competition, but fair competition. Combinations of workingmen accompany ag¬ gregations of capital. Thus the masses are arrayed against the classes. If combina¬ tions of capital were prevented, if competi¬ tion among employers of labor were enforced, the independent demand for labor from com¬ peting sources would tend to fair wages, such as prices might warrant.
4. It is insisted that this agreement
among railroads to prevent competition is not only innocent, but wise and salutary, because in the ease of railroads competition is ruinous; that if competition reduces rates below the point of profit for any line, it must ultimately be bankrupted, for it cannot stop running nor can the capital invested in it be withdrawn.
But this argument applies to all great modern industries, in manufacture as well as transportation. Capital fixed in a valu¬ able plant cannot be withdrawn, nor can la¬ bor skilled in one industry be readily shifted to another. Both manufacturers and work¬ ingmen are subject to the contingencies of competition. The establishment of a new plant with modern improvements may de¬ stroy some old one, in which both have vir¬ tually risked their all.
Why are not men who put their capital or skill into a manufacturing plant just as much entitled to protection against ruinous competition as those who put their money or skill in a transportation plant? Why should the railroads be singled out from all the (-meat interests of this country, and alone 171 U. S.
be authorized to combine and prevent compe¬ tition and keep up prices?
Competition drives the weak to the wall; the fittest survive; but the greatest good to the greatest number results. The opening of new mines, the construction of new plants, the establishment of industries with im¬ proved methods of production and greater natural advantages, lower the cost of pro¬ duction of the commodity to the benefit of the public; but the person or corporation or region which cannot lower its cost of pro¬ duction to meet the new competition must suffer. Under competition the most improved plant, the best trained labor, the most eco¬ nomical management, the wisest business sa¬ gacity and foresight, is not only encouraged but demanded for success.
The best railroad, the one constructed and equipped and managed in the best way, will get the bulk of the competitive business, and it ought to. It can afford to carry the traf¬ fic at lower rates than the poorer roads, and it ought to be allowed to in the public in¬ terest. The poorer roads can get the busi¬ ness by putting themselves in shape to do the business. Roads equally fitted to the work will naturally divide the competitive busi¬ ness in equitable proportions. Competition for traffic by improved service and lower rates will result naturally, not in ruining the roads, but in building them up. Under competition the best road fixes the rate; un¬ der combination the poorest road.
Is it just to make the public pay rates from Chicago to the east fixed by the poor¬ est system protected by the Joint Traffic agreement?
5. It is contended that there is no re¬
straint on trade, because the railways still exist, with all their facilities for transpor¬ tation, ready and willing to serve the public, and with no inducement for service weak¬ ened; that competition in every desirable aspect remains, the railroads being permitted to compete, but compelled to do it openly, under the provision that a deviation from the association rate cannot be made except by resolution of the board of managers and after thirty days’ notice to the managers.
Tt is true that railways exist, with their original facilities, but the inducement for improvement by cheaper methods of trans¬ portation is weakened, the motive for compe¬ tition removed, the means of competition de¬ stroyed, and competition itself absolutely for¬ bidden. The natural result of preventing competition is to keep up rates. An excess in rates over what would obtain under com¬ petition amounts in effect to a tax on the things transported. This operates as a bur¬ den upon commerce and a restraint of trade.
If a state should levy a tax on goods trans¬ ported through it, this court would hold such an act unconstitutional because it has laid a burden upon interstate commerce. Moreover, to increase rates and maintain them at a point above what would obtain un¬ der competition, decreases the business of railroads, but enhances the cost of it. and thus restrains trade or commerce. Lower rates mean more traffic, both freight and pas¬ senger. Higher rates mean less traffic. It
27 9
Supreme Court op the United States.
Oct. Term
may be to the interests of the railroads to in¬ crease the rates and lessen the traffic. The profits may be as much or more, but it is done at the expense of the public and to the restraint of trade.
6. It is insisted that rates must be stable,
not subject to change; that a manufacturer cannot safely make goods or a dealer buy them unless he knows the rates for trans¬ porting them to market, and may rely upon these rates continuing; therefore agreements for maintaining rates at a fixed point should be encouraged.
It is obvious the manufacturer or dealer must not only take into account the rates he will have to pay to market, but the rates his competitors from every quarter by land and water will have to pay. It is impracticable to attain a cast-iron uniformity of this kind, and neither the interstate commerce law nor the Joint Traffic agreement attempts it.
Moreover, the agreement does not assume to prevent a change of rates. It virtually takes the power to change from the companies, out gives it to the managers of the association. For natural it substitutes arbitrary change. The protest against any change in rates is a protest against progress. The history of railroads shows a constant tendency towards cheaper rates. This lias resulted from im¬ provements forced by competition. The in¬ terest of the public lies, not in maintaining but in reducing rates, and to effect such re¬ duction competition is essential.
7. Uniformity in rates is declared to be
essential, and it is urged that the provisions of the interstate commerce law favoring uniformity cannot be enforced except by sup¬ pressing competition through this agree¬ ment; and, to illustrate the need of uniform¬ ity. it is said that without it an industry in Michigan equidistant from market with a similar industry in Indiana might be wiped out of existence by reduced rates in favor of the Indiana industry.
But neither the Interstate Commerce Act nor this agreement would prevent the alleged injustice suggested. Tine case instanced in¬ volves a reduction of rates on local traffic, and the agreement only applies to competi¬ tive traffic. There is nothing in the agree¬ ment to prevent any member of the associa¬ tion from changing the rates from local points; the jurisdiction of the association is restricted to competitive traffic.
Suppose two similar industries located in Pennsylvania, each supplying the New York market, and each equally distant from New York, hut one located on the Pennsylvania and the other on the Lehigh Valley system. For one industry the Lehigh Valley is the only line to New York; for the other the Penn¬ sylvania. There is nothing in the Interstate Commerce Act, or in the Joint Traffic Agree¬ ment, to prevent the Pennsylvania from re¬ ducing the rate to New York;, nothing to prevent the Lehigh Valley from reducing such rate.
The uniformity demanded by the Inter¬ state Commerce Act is uniformity in the treatment by each railroad of its own pa¬ trons. The 2d section prohibits a common
280
carrier from charging one person more than another for the same service; it does not pro¬ hibit a carrier from charging one person more or less than another railroad charges another person for the same distance. The 3d section forbids a common carrier to give any undue preference or advantage to any person or locality over any other. But this only applies to the action of a railroad to¬ ward the people or places served by it. And so, too, with reference to the long and short haul provisions in the 4th section.
The interstate commerce law declares that all charges must be just and reasonable. It provides no means for securing this de¬ sideratum except competition. The only method of stifling competition when the law was passed was the pooling agreement, and this was prohibited. Competition between railroads was preserved, and to secure the benefit of competition to all patrons of each road it was provided that the competition should be open and above board, so the peo¬ ple might be advised of the v existing rates, and each railroad was required to treat its patrons with uniformity, without discrimi¬ nation and without preferences.
The object of the law was to secure the benefit of competition to all, and not permit a road to charge those shippers for whose patronage it does not have to compete exces¬ sive rates, while secretly granting lower rates to those shippers for whose patronage it does have to compete. The competition was to be restricted to where it belongs; be¬ tween the railroads, and not between the shippers. If a railroad can afford to carry freight of one shipper for a certain rate, it can afford to carry for the same rate like freight under similar conditions for every other shipper.
Chicago d N. TF. R. Co. v. Osborne, 10 U. S. App. 430, 52 Fed. Rep. 912, 3 C. C. A. 347", 4 Inters. Com. Rep. 257.
8. It is contended that uniform rates
should be maintained on the trunk lines in order to keep the weaker roads in operation for the benefit of the sections through which they run.
As I have pointed out, the agreement does not apply to local traffic. As to it each road has a monopoly, with power to fix its own rates. The agreement applies only to com¬ petitive traffic between great centers. The argument, then, amounts to this, that rates on through traffic are to be kept up in order to preserve the weak roads as going con¬ cerns for the benefit of the sections through which they run. What is this but to tax the many for the benefit of the few? It is not the function of the government to neutralL.e the advantages of locality. The people pay for these and are entitled to them. If I settle in a flourishing region on a good line, I pay for the privilege in the cost of land, in taxes, etc. If I settle in an undeveloped region on a poor road, I pay little for either the privi¬ lege or the land, and must expect to help bear the cost of development.
9. It is said that the Interstate Commerce
Act was passed to suppress competition and secure uniformity in rates.
It was not passed to suppress competition,
171 TJ. S.
1898.
United States y. Joint-Traffic Association.
but to preserve it and secure its benefits to all. Competition between independent lines was preserved, and uniformity enforced to secure the benefit of this competition to all. Each carrier was required to treat its patrons with uniform fairness, without pref¬ erence and without discrimination. The only effective arrangement used at that time by the trunk lines to stifle competition was the pooling agreement, and this was pro¬ hibited. It was recognized that competition would keep the rates reasonable, and the long and short haul provision was intended to secure to all points on each road the bene¬ fit of such competition. Unjust discrimina¬ tion and undue preferences by a railroad among its patrons was prohibited. Thus the benefits of open competition were insured to all. The policy was, among the patrons of each road, uniformity, but between the roads open competition.
First Report of Interstate Commerce Com¬ mission 1S87, p. 33.
10. The point is made that railways are
public highways, and the furnishing of rail¬ way transportation is a governmental func¬ tion ; therefore the government should eliminate the advantage of locality by en¬ forcing absolute uniformity in rates, or per¬ mit the railroads to do it by preventing competition and maintaining arbitrary rates.
It may be conceded that the furnishing of railroad transportation is a public function, and therefore the government may regulate it. Government, state and Federal, has done this by forbidding the consolidation of com¬ peting lines, by prohibiting pooling con¬ tracts, and by making illegal all agreements in restraint of trade.
The absolute uniformity demanded is nei¬ ther practicable nor desirable. Absolute uniformity extending to every rate, from every point, on every railroad, means abso¬ lute consolidation of control and absolute arbitrary rates, and this is absolutely incon¬ sistent with competition. It admits of no competition. The desirable uniformity is that which goes along with competition, and supplements it, and secures its benefits to all shippers without distinction. Each railroad should be required to treat its patrons — per¬ sons and places — with fairness and equality, without preference or discrimination. It should not be required, however, to treat its shippers no better than other lines treat theirs. On the contrary it should be induced to treat its shippers the very best it can, and thereby make it incumbent upon competing lines to treat their shippers as well. It should be induced to do this, not only in rates, but in service. The rigid, cast-iron, arbi¬ trary rule of absolute uniformity as between railroads, contended for, would logically pre¬ vent all competition, whether in rates or service.
Ames v. Union P. R. Co. 64 Fed. Rep. 165, 4 Inters. Com. Rep. 835; Interstate Com¬ merce Commission v. Baltimore <f- 0. R. Co. 145 U. S. 276, 36 L. ed. 703, 4 Inters. Com. Rep. 92; Cincinnati, N. 0. tf T. P. R. Co. v. Interstate Commerce Commissioners, 162 U. S. 184, 40 L. ed. 935, 5 Inters. Com. Rep. 171 U. S.
391; Freight Bureau Cases, 167 U. S. 479, 42 L. ed. 1243 ; Southern P. Co. v. Railroad Commissioners, 78 Fed. Rep. 236.
11. If the railroads are not to be permit¬
ted to combine and prevent ruinous competi¬ tion, and establish and maintain reasonable rates by arbitrary methods, then, it is said, they must either abandon transportation, or consolidate, or persistently violate the law.
There is a virtual consolidation now of these roads under the agreement. The pub¬ lic is not interested in consolidation except as it affects competition. The Constitutions and laws of many states prohibit the consol¬ idation of railroads, but only of competing railroads. Lines which do not compete may consolidate, and the public thus gains the benefit of broader and more economical ad¬ ministration. Railroads which compete may not consolidate, because it prevents competition and keeps up rates.
Public policy has demanded the prohibi¬ tion of the consolidation of competing lines; for the same reason Congress enacted the anti-pooling section of the Interstate Com¬ merce Act. The pooling of freights and the division of earnings is not bad in itself. It is bad because used to stifle competition. Equally bad is the Joint Traffic Agreement before the court, which operates as effectual¬ ly as any pooling arrangement ever devised. The people have not stopped to inquire whether consolidation would result of neces¬ sity in unreasonable rates; neither have they stopped to inquire whether pooling would result necessarily in unreasonable rates. It is the tendency, not the absolute result, which has operated to prohibit consolidation, to prohibit pooling, to prohibit contracts in restraint of trade.
Pearsall v. Great Northern R. Co. 161 U. S. 646, 676, 40 L. ed. 838, 848; Louisville & N. R. Co. v. Kentucky, 161 U. S. 677, 698, 40 L. ed. 849, 858.
The railroads say that if they are not per¬ mitted to prevent competition they will com¬ pete, and in doing so will violate the inter¬ state commerce law; that they should be per¬ mitted to combine for the purpose of pre¬ venting violations of the law, even if in do¬ ing so competition be prevented.
But to prevent competition is in itself to violate the law. Better the chance to vio¬ late one law than the certainty of violating another. Better the motive to violate one law than the mandate to violate another. If the ability the railroads employ to cir¬ cumvent the law were used to observe it, neither this agreement nor the arguments in support of it would be before the court. The railroads promise to obey one law if the court will permit them to violate another. Would they keep the compact, if made? Respect for the law based solely on self-in¬ terest is delusive and evanescent.
12. An attempt is made to distinguish this
case from the Trans-Missouri case by say¬ ing that here the association simply adopted the admitted fair and reasonable rates then in force and filed with the Interstate Com¬ merce Commission by the companies: while in the Trans-Missouri ease the association was given power to fix rates. But in the
Supreme Court of the United States.
Trans-Missouri Agreement the association was only given power to fix reasonable rates, and the fact that the rates fixed by the asso¬ ciation during its existence were fair and reasonable was admitted by the denials and allegations of the answer, which appear in the statement of the case. United States v. Trans-Missouri Freight Asso. 160 U. S. 303, 41 L. ed. 1015.
There is no less power in the Joint Traffic Association than in the Trans-Missouri, in¬ deed more power with respect to rates ; and it is with the power alone that the court is concerned, not how the power has been or may be exercised.
In the Trans-Missouri case the association had been dissolved. The only question was the legal effect of the authority conferred by the agreement. If there were no power un¬ der the Joint Traffic Agreement to change rates, nevertheless the power to maintain rates arbitrarily would involve the authori¬ ty to keep them up after progress and inven¬ tion should render them excessive and unrea¬ sonable. But in point of fact, as pointed out, the Joint Traffic Agreement vests in the association, through the managers, with ap¬ peal to the board of control, the authority to change rates. This authority is more co¬ ercive than that conferred by the Trans-Mis¬ souri Agreement.
Under the Trans-Missouri Agreement, five days’ written notice prior to each monthly meeting was required to be given the •chairman of any proposed reduction in rates. At each monthly meeting the association vot¬ ed on all changes proposed. All parties were bound by the decision of the associa¬ tion, “unless then and there the parties shall give the association definite written notice that in ten days thereafter they shall make such modification, notwithstanding the vote of the association. . . . Should any member insist upon a reduction of rates against the views of the majority, and if in the judgment of said majority the rates so made affect seriously the rates upon through traffic, then the association may, by a major¬ ity vote upon such other traffic, put into ef¬ fect corresponding rates to take effect the same day.” Moreover, each member of the Trans-Missouri Association might, at its per¬ il, make a rate without previous notice to meet the competition of outside lines, giving the chairman notice of its action, so the good faith of the transaction might be passed up¬ on by the association at its next meeting.
Thus, under the Trans-Missouri Agree¬ ment each member might, at its peril, make a rate to meet outside competition, and each member might, upon giving ten days’ notice make an independent rate notwithstanding the action of the association. But under the Joint Traffic Agreement no company can deviate from the rates as fixed by the man¬ agers except by a resolution of its board of directors, and thirty days after a copy of such resolution is filed with the managers. This absolutely prevents competition, and the intention to prevent competition is plain from the provision (art. 7, § 2, close). The managers upon receipt of such notice shall 282
Oct. '1 ekm,
act promptly upon the same for the protec¬ tion of the parties hereto.
Mr. Carter in his argument explained the operation of this clause. Thirty days’ no¬ tice of the intention of any company, by res¬ olution of its board, to deviate from the rates fixed by the association 'through its mana¬ gers, was required in order that the associa¬ tion might have time to determine its course of action. If it could meet the rate proposed by the deviating member, it would do so. If it could not, it would take steps, in Mr. Carter’s language, ‘‘to exterminate” the re¬ calcitrant company. In no other way, ac¬ cording to Mr. Carter, could ruinous compe¬ tition be prevented and the interests of all members of the association protected.
13. It may be conceded that the public
along each line is interested in the line get¬ ting its fair share of the through traffic and earnings: and this it will get under competi¬ tion. The local public is not entitled, how¬ ever, to an arbitrary share of the through tiaffic and earnings. It has a right to no more than the advantages oJ the line at¬ tract. To give it more is to take what be¬ longs to another line and another section.* A prosperous section, with an intelligent, pro¬ gressive population, makes a good railroad, and a good railroad attracts through traffic; and it is not just or right to take this traffic away and give to a poor road, in order to do for it what the public along its line ought to do.
14. The provisions of the interstate com¬
merce law preventing discrimination and un¬ due preferences have been discussed; they can be enforced without nreventing compe¬ tition. The 10th article of the Joint Traffic Agreement provides that “the managers shall decide and enforce the course which shall be pursued with connecting companies not parties to this agreement, which fail or decline to observe the rates, fares, and rules established under this agreement,” and it is contended that this provision is necessary to prevent discrimination against one company and in favor of another by connecting lines; but a reading of the 3d section of the Inter¬ state Commerce Act shows that the mischief suggested is fully provided for in its con¬ cluding paragraph, which provides that every common carrier shall afford equal fa¬ cilities for the interchange of traffic and for receiving and forwarding freight or passen¬ gers from connecting lines, and shall not dis¬ criminate in their rates and charges between such connecting lines.”
15. It is insisted that if Congress had in¬
tended the anti-trust law to prohibit every contract in restraint of trade, whether par¬ tial or general, reasonable or unreasonable, it would have used the language “every con¬ tract in any restraint of trade,” etc., “is hereby declared to be illegal.” It seems to me, and I submit to the court, that the ex¬ pression “every contract in restraint of trade” is quite as comprehensive as “every contract in any restraint of trade,” and much better language.
16. The reply to Mr. Phelps’s attack upon
the constitutionality of the anti-trust law as construed by this court in the Trans-Mis-
171 U. S.
1898.
United States v. Joint-Tuaffic Association.
538, 559
eouri case, is to be found in the argument of Mr. Carter that railways are public high- vays, and in furnishing public transporta¬ tion perform in a sense a governmental func¬ tion. The right of the government to regu¬ late contracts between carriers and shippers and to place proper restrictions upon con¬ tracts among carriers themselves, in order to protect the interests of the public, as af¬ fected by these instrumentalities of com¬ merce, has not heretofore been seriously questioned. The states regulate the construc¬ tion, maintenance, and operation of rail¬ roads, prescribing and enforcing maximum rates, preventing the consolidation of com¬ peting lines, and securing to the public the benefit of competition.
The doctrine laid down in the ease
of Munn v Illinois , 94 U. S. 113, 24 L. ed. 77, applies. When a man devotes his property to a public use, to that extent he grants the public an interest in that use. The same policy which supports the prohibition against consolida¬ tion, and the 5th section of the interstate commerce law forbidding the pooling of freights or the division of earnings, is the justification for the declaration that all con¬ tracts in restraint of trade shall be deemed illegal. The result of the consolidation, the pooling, or combination in restraint of trade, is beside tire question. Congress is entitled to pass judgment upon the tendency of a contract in restraint of trade. If it deems such a contract reprehensible, injurious In its tendencies, it may prohibit it, whether the act will result in a particular case in the establishment of reasonable or unreasona¬ ble rates.
17. As to the remedy in case of an unrea¬
sonably low rate. Judge Cooley, in a well- considered opinion, Re Chicago, St. P. & K. C. R. Co. 2 Inters. Com. Rep. 137, 2 Inters. Com. Com. 231, approved by this court in In! erst ate Commerce Commission v. Cincin¬ nati , N. 0. & T. P. R. Co. 167 U. S. 511, 42 L. ed. 257, held that under the interstate commerce law the Commission has no power to determine that a rate is unreasonably low, and to order the carrier to refrain from charging such rate on such ground.
18. As to the remedy in case of an unrea¬
sonably high rate.
The common law requires that rates should be reasonable and fair. So does the interstate commerce law. But this is a mere declaration, and there is no adequate remedy to enforce the right. The Commission has no power to prescribe a reasonable rate and enforce it, or to declare that a rate is unrea¬ sonable and prohibit it. The shipper is therefore left to recover the excess in rate paid. I know of no case where the excess charged over a reasonable rate on interstate commerce has been recovered back. The amount involved in any particular transac¬ tion would be small; it rvould require years to carry the case through the courts, and no individual shipper would invite the ill will of a powerful railroad by beginning such a con¬ test.
Moreover, the man who actually pays the freight is not the man who suffers from the unreasonable charge. Take the case of I
171 U. S.
grain. The farmer sells to the commission merchant. If the rates are excessive he gets sc much less for his grain, or the purchas¬ er from the commission merchant pays so much more for it. The commission merchant who pays the freight has no real interest in the charge. Of course this is not always true, but it does apply with respect to the great shipments handled by middlemen.
Finally, it is questionable under the Inter¬ state Commerce Act whether a suit to re¬ cover back an excess paid above a reasonable rate can be maintained, if the rate charged was that fixed in the schedule filed with the commission and published under the inter¬ state commerce law.
Van Patten v. Chicago, M. & St. P. R. Co. 81 Fed. Rep. 545.
19. As the law stands the Commission has
no power to prescribe or enforce rates. Com¬ petition secures reasonableness; the law en¬ forces uniformity. In Interstate Commerce Commission v. Cincinnati, N. 0. & T. P. R. Co. 167 U. S. 479, 42 L. ed. 243, this court, speaking by Mr. Justice Brewer, held that if Congress had intended to give the Commis¬ sion power over rates it would have done so in unmistakable language. So, too, when Congress sees fit to take the railroads out of the operation of the natural law of trade it will do so in plain terms, and for independ¬ ent competition will substitute governmental regulation.
Messrs. James A. Logan and John O. Johnson filed a brief for the Pennsylvania Railroad Company and other railroad com¬ panies, appellees.
Messrs. Robert W. de Forest and David Willcox filed a brief for the Central Railroad Company of New Jersey, appellee.
*Mr. Justice Peckham, after stating the [558J facts, delivered the opinion of the court:
This case has been most ably argued by counsel both for the government and the rail¬ road companies. The suit is brought to ob¬ tain a decree declaring null and void the agreement mentioned in the bill. Upon com¬ paring that agreement with the one set forth in the case of United States v. Trans-Mis¬ souri Freight Association, 166 U. S. 290 [41 : 1007], the great similarity between them suggests that a similar result should be reached in the two cases. The respondents, however, object to this, and give several rea¬ sons why this case should not be controlled by the other. It is, among other things, said that one of the questions sought to be raised in this case might have been, but was not, made in the other ; that the point there¬ in decided, after holding that the statute ap¬ plied to railroad "companies as common car-